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

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

by Griffin Kruse

Published on Apr 7, 2015 at 2:30 PM
Updated on Jun 24, 2020 at 12:42 PM

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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