Bears take the wheel in $GM

Option traders are making quick profits on downside positions in General Motors (GM) today.

Market Rebellion’s Unusual Activity tracking systems detected bearish activity in the same strike on two consecutive sessions last week:

–On Mar. 9, 5,000 June $20 puts were purchased for $1.20 as part of a bearish roll above open interest of 768 contracts with shares at $25.23.
–On Mar. 11, 20,000 June $20 puts were bought for $1.20 to $1.27 below open interest of 8,238 contracts, but apparently another bearish roll following the one just days prior, with shares at $26.11.

Those puts traded for as much as $7.15 today, more than 5.5 times their purchase prices. The stock fell 43.78% in the same time frame, underscoring how options can far outperform moves in their underlying shares on a relative basis.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.

GM closed the session lower by 17.28% to $16.80 today. The company announced earlier today that it would begin the suspension of its manufacturing operations in North America to help curb the spread of the COVID-19 coronavirus.