As of 1:40 p.m. EDT, shares of General Motors Company
(NYSE:GM) were up 1.5% at $34.65, bringing their week-to-date gain to more than 4%. Against this backdrop, GM calls are once again
flying across the tape, with speculators betting on more short-term upside for the automaker.
In early afternoon trading, GM had seen about 26,000 calls change hands -- more than twice the norm, and around 11 times the number of puts traded. The stock's at-the-money weekly 7/12 34-strike call has seen close to 2,800 contracts cross the tape at a volume-weighted average price (VWAP) of $0.85. Most of the calls traded on the ask side, and volume has surpassed open interest at the strike, pointing to buy-to-open activity.
To reap a reward on their call purchases, the buyers need GM to extend its uptrend and climb atop $34.85 (strike price plus VWAP) by the end of next week. So far today, GM has peaked at $34.71 -- just a hair's breadth from breakeven. Should the equity retreat beneath the strike by next Friday's close, when the options expire, the most the buyers are risking is the initial premium paid for the calls.
From a broader sentiment standpoint, today's affinity for short-term calls marks a change of pace among GM's options crowd. The stock's Schaeffer's put/call open interest ratio (SOIR)
of 0.63 stands higher than 71% of all other readings of the past year, implying that near-term options players are more put-heavy than usual right now.
Digging deeper, the July 34 put is home to peak put open interest in the front-month series
, with close to 7,400 contracts in residence. In the short term, this abundance of bearish bets could translate into options-related support for GM.
The stock could also find an ally in its uptrending 10-week moving average, which has ascended into the $33.32 neighborhood. This trendline -- along with its 20-week cohort -- has ushered GM significantly higher since August 2012.
This article by Andrea Kramer was originally published on Schaeffer's Investment Research.
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