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January 9, 2013  Wed 2:45 AM CT

GM: SEE CHART GET CHAIN FIND STRATEGIES
A large trader is selling calls in General Motors as its shares slip from recent highs.

More than 7,500 January 2014 37 calls were sold yesterday, with prints of 3,197 and 4,000 going for $1.03 and $1.02 respectively, according to optionMONSTER systems. This is a new position, as the previous open interest at that strike was just 121 contracts.

The calls may have been sold naked in a bet that GM won't be trading above $37 by that expiration. The delta of the options is just 0.23, suggesting a 23 percent probability that the stock will be above the strike price at that time.

The calls could also have been traded against an existing stock position in a covered call strategy, which would be bullish up to the strike price but not beyond. (See our Education section)

GM was down 0.98 percent to $29.37 at the end of the day. The auto maker finished Friday at $29.86, its highest close in about 18 months. Shares were at a 52-week low of $18.72 in July.
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Education & Strategy

Gamma

As we continue to discuss the Greeks, we come to the first of the strike based Greeks called Gamma. Gamma is known as the second derivative, while delta is the first.

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