$GM bulls drive profits

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

On Mar. 2, Market Rebellion’s Unusual Activity tracking systems found that 18,200 April $60 calls were bought for $0.83 to $1.45 with shares at $52.43. This was clearly fresh buying, as open interest in the strike was only 9,828 contracts before the activity appeared.

Those calls traded up to $3.30 this afternoon, well over double their purchase prices. The stock rose 14.65% 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 5.13% to close at $60.06, setting new highs this session.