Bulls keep on driving profits in $GM

Option traders are driving big profits on upside positions opened in General Motors (GM) earlier this month.

On Jan. 6, Market Rebellion’s Unusual Activity tracking systems found that 10,000 Weekly $48 calls, expiring on Jan. 22, were bought for $0.52 to $0.60, as part of a roll from a previously winning position, with shares at $41.62. This was clearly fresh buying, as open interest in the strike was only 49 contracts before the activity appeared.

Those calls traded up to $6.94 today, well over 11 times their purchase prices. The stock rose 31.93% in the same time frame, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

GM was up this session by 9.72% to close at $54.84. Microsoft (MSFT) announced this morning it has entered into a long-term strategic relationship with Cruise and General Motors (GM).