GM humongus Call buys

Discussion in 'Options' started by stock777, May 16, 2005.

  1. See that huge GM call action today.

    Wazzup. Capt Kirk doing something clever here?
     
  2. Let me guess.... you are long?
     
  3. jsmith

    jsmith

    wow, GM is up .03 today while dow is up over 100. that is amazing.
     
  4. hmmmm. 0-2 not good
     
  5. I notice the questions are getting a lot better than the answers around here.

    Bad sign.
     
  6. Sanjuro

    Sanjuro

    I notice people posting lame questions/comments and getting answers that correspond in the same line.

    You sound like one of those people who buy a stock and try to hype it like on Yahoo message boards. I hope you lost money on GMs gap down today.
     
  7. div spread pure and simple...

    next question
     
  8. Sanjuro sound like an escapee from Yahoo.

    I assumed it was dividend related, would you like to explain what the 'play' is.
     
  9. div plays consists of a dividend that exceeds the cost to carry stock till expiration...

    in gm's case the div will cover cost to carry till june expiration....

    you buy and / or sell 5 point spreads or whatever the strike interval is and exercise to get long stock to collect the dividend...

    while the contra party does the same...

    your hope is that your short side of the spread is in a strike with large open interest and that you will not get assigned on as much as you exercised...

    worst case.... you get assigned on all spreads equal to what you exercised and you become flat the stock and only pay commissions...

    if you get by...exercise more than you get assigned.... then your risk is that the stock craters before expiration as you are short the synthetic put...

    spreads are normally done on deep in the money options so this risk is minimized
     
  10. Just because there was a lot of call volume it does not tell you anything. You cannot tell if they were buy to open sell to open. IN other words, an institution or large player could have sold a ton of calls against a long stock position to collect more premium or someone could be loading up on long calls. No real way to tell and guessing does not really get you anywhere either so, GM is still a company that makes large gas guzzling cars less efficient than foreign cars and has billions of pension liabilities and makes more money lending money (GMAC) than building cars. THhhhpt!

    Phil
     
    #10     May 17, 2005