General Motors Company (NYSE:GM) – Shares in General Motors are in negative territory today, down 1.5% at $29.03 as of 12:35 p.m. ET, amid a down day for U.S. stocks. It looks like some traders may be taking advantage of the dip in GM’s shares to initiate bullish bets on the stock ahead of the company’s first-quarter earnings report on May 2nd. Call options on the automaker are outpacing puts, with the call/put ratio hovering around 3.5 in early afternoon trading. Sizable volume in the June $31 and $33 strike calls caught our eye, though volume at both strikes is lighter than existing open interest levels. It looks like traders purchased around 4,000 calls at each strike, paying average premiums of $0.71 and $0.34 apiece, respectively, within the first 30 minutes of the opening bell. Call buyers may profit at June expiration should shares in GM surge 9% and more than 20% to top average breakeven points at $31.71 and $33.34. Other possible bullish signals in GM options activity today was the sale of around 1,700 puts at the May $25 striking price at a premium of $0.11 each, as well as the sale of some 500 puts at the May $26 strike for a premium of $0.22 per contract. Put sellers keep the full amount of premium as long as the puts expire worthless next month.
Textron Inc. (NYSE:TXT) – Options activity on the maker of military and civilian aircraft suggests some traders are bracing for shares in Textron to extend losses in the near term. The stock fell more than 13% this morning to an intraday low of $25.37 after the company lowered its guidance for full year earnings. Fresh interest in far out-of-the-money puts on Textron look for the price of the underlying to potentially slide to the lowest levels since July of 2012 during the next couple of months. Traders snapped up 250 puts at the May $23 strike for a premium of $0.21 each, around 150 lots at the June $23 striking price at a premium of $0.35 apiece, and purchased roughly 500 puts at the June $24 strike for a premium of $0.58 per contract. Buyers of the June $24 strike puts start making money if shares in Textron decline another 8% off today’s low of $25.37 to breach the breakeven point on the downside at $23.42 by June expiration.
Caitlin Duffy
Equity Options Analyst
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