Bullish plays accelerating in $GM

Strong sales propelled General Motors to new heights, sending bullish positions into the stratosphere.

Just yesterday Investitute’s market scanners found that 2,800 Weekly $42 calls that expire this Friday were purchased for $0.32 to $0.57 with shares at $41.99. These were clearly new positions, as open interest in the strike was only 94 contracts before the trades occurred.

Today those calls traded up to $1.68, more than 5 times their original purchase price. The stock was up less than 3.9 percent at the same time, showing how quickly options can far outpace gains in 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 rose 2.75 percent to close at $43.31 today after hitting a 52-week high of $43.70 in the morning. The auto maker’s September sales far exceeded estimates, even after factoring in increased demand from vehicles lost to the recent hurricanes.