$GM bulls stay in the driver’s seat

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

On Jan. 11, Market Rebellion’s Unusual Activity tracking systems found that 14,000 February $50 calls were bought for $1.10 to $1.37 with shares at $44.89. This was clearly fresh buying, as open interest in the strike was only 1,636 contracts before the activity appeared.

Those calls traded up to $7.50 today, well over 5 times their purchase prices. The stock rose 25.97% in the same time frame, illustrating the kind of leverage that can be achieved with options.

It is the third winning trade to be posted on Market Rebellion in the name this month.

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 1.82% to close at $55.86. Deutsche Bank named it a ‘Catalyst Call: Buy Idea’ and raised its price target on the shares to $64 from $48 this morning.