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GM shares could plunge another 13% in a month, bets options trader
CNBC
Wed, 09 Oct 2019 16:52

GM shares could plunge another 13% in a month, bets options trader

CNBC
Wed, 09 Oct 2019 16:52

The strike by General Motors employees is in the middle of its fourth week, and the companys stock is starting to feel the pressure.

GM shares could plunge another 13% in a month, bets options trader


Over the last month, GM shares are down a whopping 14% as employees and management battle over higher wages and increased job security; as long as the two sides continue to fight it out, the automakers stock is likely to continue its plunge.
As Dan Nathan, co-founder of Risk Reversal Advisors, pointed out Tuesday on "Fast Money," one options trader is betting on those battles to continue for at least another month.

"The trade I want to focus on looked to be a bearish roll from January 2020 to the November 33-puts 10,000 times," Nathan said. "It looked like an opening buyer in the November [30-puts]."

This trader paid 38 cents for each one of these contracts, meaning that this trader is making a $380,000 bet that General Motors will plunge at least 13% from Tuesdays close, or down below $29.62.

From a technical standpoint, Nathan sees signs that a breakdown to that level could very well happen.
"If you look at this move weve had over the last month, down about 15%, it places GMs stock right below that uptrend that has been in place since the December lows," Nathan said.

The stock has, indeed, already seen a peak-to-trough decline of more than 15% during that time, but if the strike continues through November, GM is in danger of breaking a much more significant technical trend.
"Since 2010 when the stock re-IPOed, you see that uptrend that has been in place from the 2012 lows. Were getting close to there," Nathan said.

"This one is in a precarious technical spot, and we dont know what the results going to be. We know, in a month or so, this company is going to report earnings, and if they dont have any solution to this strike, its going to be a dire outlook going forward."

GM was trading slightly higher in Wednesdays session.

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