Friday, September 26, 2008

GM Options Update: Out of the Money Call Volume, Bought To Open, Technicals ($25B Loan Catalyst)

Chart Source:

I wanted to point out that I saw a large amount of out of the money GM calls traded yesterday (9/25/08) at the OCT $15, and NOV $15 Strike. The stock closed at $10.03 that day. I mentioned this on Twitter last night when I checked the option chain and wanted to know if these were in fact buy to open orders.. I use Twitter to provide quick observations of trading activity, links or news headlines.. The most recent updates are posted on the right side of my blog.
"Hmm, lots of GM out of the money calls traded today. 14,689 Oct 15 Calls (19,989Open), 5,517 Nov 15 Calls (694Open).. Need OI tomorrow" (

Well it looks like these call options were bought to open. The OCT $15 Call open interest increased 60% to 31,936, and the NOV $15 Call open interest increased 746% to 5,180! If this is a speculative player they are definitely betting that the $25 billion loan from the Government will pass, and it is possible it could be passed this weekend (probably with the mortgage bail out talks).
"WASHINGTON (Dow Jones)--U.S. auto makers may not have access to a proposed $25 billion loan package for at least 18 months, Bush administration officials said, setting up a potential clash with congressional lawmakers. The loan package to help companies meet stricter fuel-economy standards was passed by the U.S. House on Wednesday and is expected to be passed by the Senate as soon as Saturday. The White House is expected to sign the bill." WSJ

There are still option players looking at the potential downside. Puts are active today as the stock is down .18 to $9.85. So we'll see how the options market reacts to the decision.


jprinvestment said...

That could've been a short hedging the news and MM moving to next month, or some type of spread... Plus they haven't passed the financial intervention bill yet. Today somebody thinks the unsecured senior ETNs won't be paid off in BK. Im thinking $25 Gov loans put them further back in BK line. In my opinion. Thinking they dilute stock if loans won't help.
Gm Exchange Traded Notes -9% today.

jprinvestment said...

And the december 14, 10 put strike are active, if long profits under $8, plus GM is on the NO Short list.

Distressed Volatility said...

Yea... It was interesting that GM was up this morning before the bailout failure. There definitely wouldve been a rally if they signed the bill. If banks cannot extend credit to new auto buyers, GM will not generate enough cash and will probably burn through their existing credit facilities and $25 Billion loan very quickly if theres still no demand.

Plus who knows how long it will take for GM to get the actual check from the GOV. Not sure why the common isn't falling like a rock if there's nervousness in the unsecured notes.. I thought they would dilute the equity by now. Crazy