$GM option bulls drive away with gains

Option traders are driving gains in upside positions opened on General Motors (GM) last week.

On Nov. 22, Market Rebellion’s Unusual Option Activity Service found that 6,000 Weekly $29 calls, expiring Dec. 1, were bought for $0.25 to $0.26 with shares at $28.10. This was clearly fresh buying, as open interest in the contract was just 1,496 before the activity appeared.

Those calls traded for as much as $3.21 today, a 1,134.62% return, while the stock rose 14.73% 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 last higher on the day by 9.8% at $31.72.