General Motors Calls Active Again as Stock Hits New Highs

General Motors Company (NYSE:GM) options traders have been selling to open calls in recent weeks

Mar 6, 2017 at 3:17 PM
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Though the stock has since pulled back to trade at $37.84, shares of General Motors Company (NYSE:GM) earlier hit a nearly two-year high of $38.55. The move comes amid news the automaker is selling its European Opel business to France's PSA Group for just over $2 billion. Separately, GM is also laying off roughly 1,100 workers at a Michigan plant. Against this backdrop, GM options traders are taking action, with calls crossing at two times the pace typically seen at this point in the day. 

At last check, roughly 73,000 calls have traded, compared to just 25,000 puts. However, this doesn't exactly mean traders are placing bullish bets on General Motors. According to Trade-Alert, one of the largest trades today occurred at the April 39 call, where a trader may have bought to close 5,000 contacts originally sold last Wednesday. In fact, another trader may have sold to open 15,000 March 40 calls for 8 cents each, meaning he or she could collect $120,000 (number of contracts * price paid * 100 shares per contract) if the stock holds below $40 through the close on Friday, March 17, when front-month options expire. 

Data confirms that call selling has been a popular strategy of late. During the past two weeks, 22,840 GM calls were sold to open across the major exchanges, compared to 13,327 bought to open. And there's been no sign of accelerated put buying, as the stock's 50-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) of 0.52 is just 1 percentage point from an annual low. 

As such, near-term options open interest is unusually call-skewed. This fact is illustrated by GM's front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 0.13. In short, this reading reveals near-the-money calls outweigh puts in the March series by nearly 10-to-1. 

Options traders aren't the only ones showing skepticism on Wall Street. Analysts are largely bearish, with nine of 13 rating General Motors Company (NYSE:GM) a "hold." Given the shares' new milestone, and their nearly 20% year-over-year advance, GM stock looks like a prime candidate for bullish analyst attention.

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