Unusual Options Activity: General Motors (GM)

Car and truck producer General Motors (GM) is hitting a new 52-week high. One trader sees shares trending even higher over the next few months.

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  • That’s based on the July $50 calls. With 112 days until expiration, 11,169 contracts traded compared to a prior open interest of 188, for a 59-fold rise in volume on the trade. The buyer of the calls paid $1.12 to make the bullish bet.

    General Motors shares recently traded for about $45, so shares would need to rise another $5, or just over 10%, for the option to move in-the-money. GM just broke over its prior 52-week high in the past few weeks.

    The carmaker is holding its own in a slow market for vehicle sales. Revenues dipped less than 1% in the past year, and earnings rose by 5%.

    GM is priced at five times forward earnings, suggesting that the stock remains undervalued even as it breaks higher.

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  • Action to take: Investors may like shares at current prices. They have momentum to trend higher in the weeks and months ahead. At current prices, GM also pays a 1.1% dividend.

    For traders, the July $50 calls are well positioned for further gains in the coming weeks and months. The options can likely see mid-to-high double-digit returns on a further rally.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.

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