General Motors Company (GM) Put Options Pop on Recall News

General Motors Company (GM) stock is taking a beating, after the automaker recalled more than 4 million vehicles

Alex Eppstein
Sep 9, 2016 at 2:53 PM
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General Motors Company (NYSE:GM) is crashing this afternoon, down 4% on news of a recall impacting over 4 million vehicles, due to a defective airbag system. Not surprisingly, the auto stock's put options are running at five times the expected intraday pace, and in the 99th percentile of their annual range.

The most active strike is the October 32 put, largely due to a 19,308-contract block that crossed this morning. From the looks of it, it's possible the trader may have sold to close her position -- collecting paper profits ahead of expiration, with the put now solidly in the money.

Generally speaking, though, put buyers have been very busy at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, GM's 10-day put/call volume ratio of 2.16 rests just 4 percentage points from an annual high. Plus, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.52 outstrips 99% of readings taken in the past year.

Short sellers have also been pounding the stock. During the most recent reporting period, short interest on GM jumped over 23% to 36.8 million shares. Elsewhere, more than half of the analysts tracking the stock have slapped it with a lukewarm "hold" rating.

Technically speaking, General Motors Company (NYSE:GM) hasn't necessarily inspired confidence. Relative to its early September peak, the shares have already shed 6.5% at $30.45, and year-to-date, they've now surrendered about one-tenth of their value. Plus, the stock has tumbled below its 40-day moving average, which acted as a springboard in both July and August.

gm daily september 9

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