Option traders are driving big profits on upside positions opened in General Motors (GM) just two sessions ago.
On Jan. 27, Market Rebellion’s Unusual Option Activity Service found that 11,900 Weekly $39 calls, expiring Feb. 3, were bought for $0.52 to $0.56 as part of a bullish spread and roll with shares at $37.37. This was clearly fresh buying, as open interest in the contract was just 1,185 before the activity appeared.
Those calls traded for as much as $1.28 this session, more than 2 times their purchase prices. The stock rose 6.23% at the same time, underscoring how quickly 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 7.63% at $39.06.
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