Bulls score big win with $GM

Option traders have doubled their money in General Motors.

On March 21, Investitute’s market scanners identified the purchase of 10,100 September $40 calls for $1.65 to $1.67 with shares at $37.56. Volume was far above the strike’s open interest of 3,474 contracts, showing that this was fresh buying.

Those calls traded for $3.50 this morning, more than twice their purchase prices. The stock rose 12.3% in the same time period, illustrating how options can far outperform their underlying shares.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

GM was up 12.74% to close at $42.65 today. The auto manufacturer’s shares rallied this morning after Softbank Vision Fund announced a $2.25 billion investment in the auto maker’s self-driving car unit.