IB Options Brief: General Motors Co. (GM) & Career Education Corp. (CECO)
Demand For GM Calls Rises As Analyst Upgrades Lift Shares
GM ñ General Motors Co.
An onslaught of analyst upgrades for General Motors sent the automakerís shares higher and kicked bullish trading in its options into high gear today. GMís shares increased as much as 3.00% to secure an intraday high of $35.64 as of 12:55pm. The car and truck manufacturer was rated new ëoutperformí with a target share price of $43.00 at Credit Suisse, new ëholdí with a 12-month target of $38.00 at Soleil Securities, new ëbuyí with a target share price of $45.00 at Citigroup, and was rated new ëoverweightí at JPMorgan Chase & Co., Barclays PLC and Morgan Stanley, among others.
While near-term calls were active during the session, it was a large print in March 2011 contract calls that caught our eye. It looks like one bullish player scooped up 10,000 calls at the March 2011 $38 strike, which is more than two times greater than the 4,463 lots of previously existing open interest at that strike, for a premium of $0.85 per contract. The call buyer stands ready to profit should GMís shares jump 9.00% over the current price of $35.64 to trade above the effective breakeven point at $38.85 before the contracts expire in March. It looks like General Motors may report fourth-quarter results at some point on March 10, 2011.
CECO ñ Career Education Corp.
Put buying observed on the beleaguered provider of for-profit education services on Monday continued this morning as shares in Career Education Corp. slipped 1.6% lower to $19.95 in the first half of the session. Investors positioning for shares in CECO to decline significantly in the next couple of months purchased at least 2,000 puts at the February 2011 $17 strike for a premium of $0.39 apiece yesterday.
Today, bears once again targeted the same February 2011 $17 strike, buying up more than 2,400 puts for an average premium of $0.49 each. Put buyers paying $0.49 in premium per contract are poised to profit should Career Educationís shares plunge 17.2% from the current price of $19.95 to breach the average breakeven point to the downside at $16.51 by expiration day in February. CECOís shares hit a 52-week low of $16.36 as recently as October 14, 2010. Demand for out-of-the-money puts suggests some investors fear the education companyís shares may trend lower in the near future.
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