Bulls turn quick gains in $GM

Option traders have nearly doubled their money on upside positions in General Motors (GM) this week.

On July 22, Investitute’s proprietary programs found that 9,000 Weekly $40.50 calls expiring this afternoon were bought for $0.19 to $0.25 with shares at $40.02. This was clearly fresh buying, as open interest in the strike was only 655 contracts before the activity appeared.

Those calls traded up to $0.41 today, about twice their average purchase price. The stock rose 2.12% 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 is up 0.33% to $40.89 in midday trading. The auto maker is scheduled to report earnings before the market opens on Aug. 1.