General Motors Stock Surges Through Resistance, Options Traders Place Massive Bets

General Motors Company GM was trading higher Friday despite Wells Fargo lowering its price target on the automaker from $67 to $63. GM also announced it was extending the shut-down of a number of assembly plants due to the ongoing global chip shortage.

Competition for GM is also heating up with SPI Energy Co Ltd SPI announcing its EdisonFuture e-pickup truck, EF1-T protype. GM, with the introduction of its electric Hummer pickup slated to begin sales this fall, remains ahead of the game.

GM’s stock hit a resistance level at $50.08 Friday morning and ran into a group of sellers who dropped the stock down slightly. By mid-afternoon GM had busted through the resistance level and was attempting to regain the 21-day exponential moving average as support. If the stock can regain the level as support it has room to move up toward a higher resistance level at $52.21.

Options traders believe GM has found a bottom and will trade back up north in the future. Together the traders hammered call contacts totaling more than $6.55 million. The trades below only include orders with a total price of over $100,000.

Why It’s Important: When a sweep order occurs, it indicates the trader wanted to get into a position quickly and is anticipating an imminent large move in stock price. A sweeper pays the market price for the call or put option instead of placing a bid, which sweeps the order book of multiple exchanges to fill the order immediately.

These types of option orders are usually made by institutions and retail investors can find watching for sweepers useful because it indicates “smart money” has entered into a position.

The GM Trades: Below is a look at the notable options alerts, courtesy of Benzinga Pro:

• At 9:40 a.m., a trader executed a call sweep at the ask of 1,000 General Motors options with a strike price of $48 expiring on Sept. 10. The trade represented a $164,000 bullish bet for which the trader paid $1.64 per option contract.
• At 9:42 a.m., a trader executed a call sweep near the ask of 10,000 General Motors options with a strike price of $49 expiring on Oct. 15. The trade represented a $2.92 million bullish bet for which the trader paid $2.92 per option contract.
• At 9:44 a.m., a trader executed a call sweep near the ask of 978 General Motors options with a strike price of $48 expiring on Sept. 10. The trade represented a $180,930 bullish bet for which the trader paid $1.85 per option contract.
• At 9:46 a.m., a trader executed a call sweep near the ask of 1,000 General Motors options with a strike price of $48 expiring on Sept. 10. The trade represented a $198,000 bullish bet for which the trader paid $1.98 per option contract.
• At 9:50 a.m., a trader executed a call sweep near the ask of 2,000 General Motors options with a strike price of $52.50 expiring on Oct. 15. The trade represented a $190,000 bullish bet for which the trader paid 98 cents per option contract.
• At 9:54 a.m., a trader executed a call sweep near the ask of 1,194 General Motors options with a strike price of $48 expiring on Nov. 19. The trade represented a $456,660 bullish bet for which the trader paid $3.90 per option contract.
• At 9:56 a.m., a trader executed a call sweep near the ask of 5,301 General Motors options with a strike price of $48 expiring on Nov. 19. The trade represented a $2.06 million bullish bet for which the trader paid $3.90 per option contract.
• At 9:56 a.m., a trader executed a call sweep near the ask of 590 General Motors options with a strike price of $50 expiring on Oct. 29. The trade represented a $145,730 bullish bet for which the trader paid $2.47 per option contract.
• At 9:57 a.m., a trader executed a call sweep near the ask of 500 General Motors options with a strike price of $45 expiring on Sept. 17. The trade represented a $240,000 bullish bet for which the trader paid $4.80 per option contract.

GM Price Action: Shares of General Motors were trading up 3.42% at $50.08 on Friday afternoon.  

Photo: GMC Hummer via GM