General Motors Corporation (GM) Trader Bets Big On a Bounce

General Motors Company's (GM) January 2015 35.50-strike call was popular on Tuesday

Jan 14, 2015 at 11:24 AM
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Option bulls have been active on General Motors Company (NYSE:GM) of late. Specifically, the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 4.43 ranks in the 97th annual percentile. In other words, calls have been bought to open over puts with more rapidity just 3% of the time within the past year.

It was a similar set-up on Tuesday, when calls crossed the tape at more than two times the average daily rate, and outpaced puts by a 4-to-1 margin. A hefty portion of the day's activity came at the hands of one speculator, who bought to open a massive block of 25,954 January 2015 35.50-strike calls for $648,850 (number of contracts * $0.25 premium paid * 100 shares per contract).

Profit for the speculator will accumulate on a move north of the at-expiration breakeven mark of $35.75 (strike plus premium paid). Losses, meanwhile, are limited to the initial cash outlay, should GM settle south of the strike at this Friday's close, when front-month options expire.

Today's price action is not working in the call buyer's favor, with GM last seen off 4.1% at $33.83. Today's drop only echoes the equity's withstanding technical troubles, though, with GM shedding 14% of its value on a year-over-year basis.

On the fundamental front, General Motors Company (NYSE:GM) is presenting today at the Deutsche Bank Global Auto Industry Conference, and could shed some light on its foray into the electric car industry. Meanwhile, although the company's chief financial officer projected recalls to rise this year, CEO Mary Barra said she is "cautiously optimistic" about 2015, and expects the company's European division to return to profitability by 2016.

Daily Chart of GM Since January 2014

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