$GM bears in driver’s seat

Option traders more than doubled their money on downside positions in General Motors (GM) today.

On Sept. 13, Market Rebellion’s activity scanners showed that 2,000 Weekly $37 puts expiring on Nov. 1 were bought for $0.69 to $0.71 with shares at $39.22. This was clearly fresh buying, as open interest in the strike was a mere 2 contracts before that activity appeared.

Those puts traded for as much as $1.54 today, more than twice their purchase prices. The stock fell 6.4% in the same time frame, illustrating how quickly 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 is down 1.45% to $36.70 this afternoon. The United Auto Workers has been on strike at the car maker for nine days.