$GM bulls post fivefold gains

Option traders collected huge profits after positive quarterly results from General Motors today.

On Jan. 3, Investitute’s proprietary programs flagged the purchase of 10,000 March $36 calls for $0.86 as part of a bullish spread with shares at $32.76. This was clearly a new position, as volume was nearly double the strike’s open interest before the trade occurred.

Those calls sold for as much as $4.26 today, 5 times their purchase price. The stock rose 22.31% in the same time period, underscoring 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 1.55% to $39.91 today. The auto maker surpassed estimates on the top and bottom lines before the market opened this morning.