Trading Insights
Unusual Options Activity in GM’s Precedes Groundbreaking Partnership with Tesla
Last week, we spotted big OTM call buying in GM stocks. Today, after hours, GM shares are surging following a new GM-Tesla partnership.
General Motors (GM) has recently unveiled a groundbreaking collaboration with Tesla, aimed at harnessing the electric vehicle (EV) leader’s North American charging network and advanced technologies. Following in the footsteps of Ford Motor, GM plans to grant its vehicles access to Tesla’s extensive network of 12,000 chargers through the utilization of an adapter and its own EV charging app. Additionally, GM intends to incorporate Tesla’s NACS charging port into its EVs by 2025, replacing the prevailing industry-standard CCS.
The announcement of this significant partnership has sparked a surge in the after-hours trading of both GM and Tesla stocks.
Unusual Options Activity in GM This Week
Remarkably, Market Rebellion detected unusual options activity in GM just days before the partnership news was revealed. On June 1st, when GM was trading at a price of $32.93, a trader made a notable purchase of 4,000 June 9th $34 strike calls for a mere $0.27 per contract.
Subsequently, as GM’s stock continued its upward trajectory, the same trader doubled down by acquiring an additional 7,900 calls at the $33 strike.
The initial $34 strike calls from June 1st, which were more than 3% out-of-the-money (OTM) at the time of purchase, are now deep in-the-money (ITM), with an intrinsic value of at least $3.02. This translates to a remarkable gain of over 10 times the trader’s initial investment.
When analyzing the aftermath of unusual options activity, it is crucial to consider the timing and sequence of events. In this case, a trader made a bullish move by purchasing OTM weekly calls in GM, a stock that does not exhibit high volatility and lacked any significant news or catalysts.
Despite the stock’s subsequent rally, the trader decided to double down on their position, acquiring nearly twice the quantity of calls compared to the original trade. Notably, market-moving news regarding the GM-Tesla partnership emerged within the expiration period of both options trades, indicating that they may have been aware of this coming news.
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