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Is GM Back or Not?

Option trader sees it rising to $31 by September


So is this automaker on the road to recovery?

General Motors (NYSE: GM) was up as much as 1.4% this morning to trade at $29.94. GM hit a new low of $28.17 just last Thursday but it has been gaining for the last three days. Still, shares have been trending lower since reaching a 52-week high of $39.48 at the beginning of this year.

Leading today’s option volume are the GM Sep 31 Calls. OptionMONSTER found that 5,000 of those calls traded against open interest of 4,029. They went for $1.20, the bid price at the time, indicating that they were sold.

We don’t see these options trading against any stock today, so this could be naked call selling as a bet that GM won’t be above $31 at the time of expiration. However, it is more likely that these options were sold against long stock as a covered call position, which is bullish up to the 31 strike.

Find more option analysis and trading ideas at Options Trading Strategies.

Traders are looking for something to happen in Adobe Systems (NASDAQ: ADBE) before it reports earnings this afternoon.

Our tracking systems detected unusual activity in the ADBE July 29 Puts and the ADBE July 33 Calls. In the first transaction, some 2,400 contracts were bought in each for $0.52 and $0.82, respectively. Known as a strangle, the strategy will profit from ADBE popping to the upside or dropping lower.

Roughly the same number traded again for $0.48 and $0.84 less than 40 minutes later, though it appears that the puts were sold and the calls bought. That suggests a more bullish sentiment and would simulate owning shares in the software company.

ADBE rose 2.15% to $31.61 in morning trading but came into the session with a 10% drop since the start of June. The last earnings report on March 22 was in line with forecasts, but management cut guidance because it expected the Japanese earthquake to disrupt business.

The stock bounced yesterday at about the same level where it traded immediately after a bullish gap in December, which could lead some chart watchers to believe that it has rebounded at support and is now poised to move higher.

Volume was more than twice open interest in the July 29 puts and the July 33 calls. In ADBE overall, option activity was six times greater than average.


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