General Motors Call Volume Spikes Ahead of Earnings

The March 50 call is most active on GM today

Feb 5, 2018 at 2:33 PM
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General Motors Company (NYSE:GM) is scheduled to report fourth-quarter earnings tomorrow morning. GM stock has a mixed history of post-earnings price action, but options traders are lining up on the bullish side of the fence ahead of the results, with nearly 67,000 calls traded so far today -- two times what's typically seen, and volume pacing in the 94th annual percentile.

The March 50 call is most active, with nearly 20,000 contracts traded. It's possible new positions are being purchased here -- namely a 19,875-contract block that crossed shortly after the open. If this is the case, the goal is for GM to break out above the half-century mark by March options expiration, a level the stock has yet to surpass.

Today's seemingly bullish bias runs counter to recent action in GM's options pits, with the February 42 put seeing the largest rise in open interest over the past two weeks. Specifically, 16,124 contracts have been added here in the last 10 sessions, and Trade-Alert points to mostly buy-to-open activity here following a negative earnings reaction for Ford Motor (F).

Looking back over the past eight quarters, it's been a coin toss as to whether GM's earnings reaction has been positive or negative -- though most recently, the shares jumped 2.9% in the session after the company reported last October. At this time last year, however, the stock logged a single-day post-earnings loss of 4.7%.

Today, General Motors stock is lower, as broad-market headwinds overshadow an upbeat feature in Barron's over the weekend, with the financial news magazine noting GM's low price-to-earnings ratio "creates potential for a handsome gain" (subscription required). Nevertheless, the stock was last seen down 0.4% to trade at $40.83 -- testing the key $41 level, which has served as a floor since an early October bull gap, and represents a 38.2% Fibonacci retracement of GM's 2017 surge.


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