General Motors (GM) Options Active as Canada Hits the Bricks

General Motors Company (GM) traders are buzzing on news that Canada is selling shares

Apr 7, 2015 at 2:30 PM
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General Motors Company (NYSE:GM) is down about 2.1% to $35.91, following news that the Canadian government will unload its 73.4 million GM shares to Goldman Sachs Group Inc (NYSE:GS), which will reportedly sell the shares at $35.90 a pop. Nevertheless, RBC raised its price target on GM by $1 to $42 -- in uncharted territory -- while option traders are rolling the dice on a short-term rebound.

Overall options volume is running at roughly double the average daily rate. Drilling down, the day's two most active contracts are the weekly 4/10 35.50-strike put and 36-strike call, with buy-to-open activity taking place at the latter. By purchasing the calls to open, speculators are gambling on the equity to muscle back atop $36 by the close on Friday, when the options expire.

Prior to today, puts have been popular in the options pits. Specifically, GM's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.97 stands higher than 89% of all equivalent readings taken over the past year. Mirroring this indicator is the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.78, which also reads in the 89th percentile of its annual range. Said another way, short-term traders have rarely been this put-skewed on GM over the past 12 months.

On the charts, GM is up 24.6% from its Oct. 15 two-year low of $28.82, and has embarked on a series of higher highs and lows. Meanwhile, the brokerage bunch is mostly bullish on General Motors Company (NYSE:GM). Sixty-five percent of covering analysts rate the stock a "buy" or better, and GM's average 12-month price target of $41.53 is within spitting distance of the shares' all-time high of $41.85, implying that additional price-target hikes and/or upgrades could be coming down the pike.

Daily Chart of GM Since April 2014
 

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