IB Options Brief: General Motors Co. (GM) & Progressive Corp. (PGR)
GM ñ General Motors Co.
Shares in General Motors are up 0.80% at $24.70 after the Company revealed it sold 9.03 million vehicles globally in 2011, which could earn the Detroit, Michigan-based Company the title of worldís largest automaker by unit sales. One sizable options strategy on GM this morning looks for shares to remain range bound through April expiration.
The 10,000-lot April $24 strike straddle, the largest options trade initiated on the automaker so far today, was sold at a net credit of $3.50 per contract. The investor selling the straddle may keep the full amount of premium received on the transaction if shares in GM settle at $24.00 at expiration. Some portion of the $3.50 premium is available to the trader as long as the price of the underlying trades above the lower breakeven price of $20.50 and below the upper breakeven point at $27.50 at April expiration.
Shares in General Motors have not exceeded $27.50 since early August, but did close below $20.50 on a number of occasions during the same period, including eleven out of the thirteen final trading sessions of 2011. The stock has posted strong gains in the first three weeks of 2012, rising nearly 20.0% over the opening price of $20.83 on January 3. Fourth-quarter earnings from the Company are expected to be released five weeks from now.
PGR ñ Progressive Corp.
Better-than-expected fourth-quarter earnings announced by the insurer ahead of the opening bell lifted shares in Progressive 4.1% to a six-month high of $20.67 in the first half of the session and it looks like some options player expect the stock to extend gains in the near term. Call option volume on Progressive Corp. is heaviest at the February $21 strike where more than 1,500 contracts changed hands against open interest of 249 positions.
The majority of these calls appear to have been purchased by one trader for a premium of $0.10 apiece. Profits may be available to the investor at expiration next month if Progressiveís shares rally another 2.1% to surpass the effective breakeven price of $21.10. The stock last traded above $21.10 in July 2011.
Note: The material presented in this commentary is provided forinformational purposes only and is based upon information that isconsidered to be reliable. However, neither Interactive Brokers LLC norits affiliates warrant its completeness, accuracy or adequacy and itshould not be relied upon as such. Neither IB nor its affiliates areresponsible for any errors or omissions or for results obtained from theuse of this information. Past performance is not necessarily indicativeof future results.
This material is not intended as an offer or solicitation for thepurchase or sale of any security or other financial instrument.Securities or other financial instruments mentioned in this material arenot suitable for all investors. Any opinions expressed herein are givenin good faith, are subject to change without notice, and are onlycorrect as of the stated date of their issue. The information containedherein does not constitute advice on the tax consequences of making anyparticular investment decision. This material does not take into accountyour particular investment objectives, financial situations or needsand is not intended as a recommendation to you of any particularsecurities, financial instruments or strategies. Before investing, youshould consider whether it is suitable for your particular circumstancesand, as necessary, seek professional advice.
View Caitlin Duffy's post archive >