Stocks: Options Traders Brace for GM To Make Big Move After Report -- WSJ
July 31 2019 - 3:02AM
Dow Jones News
By Gunjan Banerji
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 31, 2019).
Shares of Ford Motor Co. and General Motors Co. have diverged
this month, with Ford's stock price slipping and General Motors'
rising.
Their fates could come together, however, when GM reports
earnings this week, analysts said.
Ford has fallen about 6.7% in July, while GM is up 4.9%. They
each have notched gains in 2019 of more than 20%.
Ford last week reported flat second-quarter operating income and
a disappointing earnings outlook. Overall U.S. vehicle sales fell
in the latest quarter and, analysts said, GM isn't immune to these
types of headwinds.
"In light of [Ford's] drop after its number last week, I don't
think GM is so different from [Ford] that its earnings would be
much better," said Tom Preston, quantitative strategist at options
education platform Tastytrade.
The forward price/earnings ratio, a traditional valuation
measure, has ticked up for Ford and GM since the end of 2018.
Options traders appear to be bracing for a big move in GM stock.
They are projecting a 3.9% move after it reports its earnings
before the market opens on Thursday, above the average 3.5% move
recorded over the past eight earnings releases, according to data
provider Trade Alert. The forecast is based on a trade called a
straddle, which doesn't measure whether the stock will go up or
down, only the size of the swing in either direction. A straddle
entails buying both bearish and bullish options that allow
investors to buy or sell stock as a specific price.
"The risk in GM earnings...are certainly to the downside," said
Shawn Cruz, manager of trader strategy at TD Ameritrade.
Write to Gunjan Banerji at Gunjan.Banerji@wsj.com
(END) Dow Jones Newswires
July 31, 2019 02:47 ET (06:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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