GM Analysis

General Motors Co. (GM)

Update 4/28/2017: GM gapped higher at the opening bell after earnings were published and then declined sharply, ending up near its closing price the day before. I exited my position at 25% of maximum potential profit.

Shares showed at net rise of 1.0% over one day, or a +346% annual rate. The options position produced a 33.3% yield on debit for a +40,758% annual rate.


 

GM publishes earnings on Friday before the opening bell.

I shall use the series of weekly options that trade for the last time eight days hence, on May 5.

Implied volatility stands at 26%, which is 2.4 times the VIX, a measure of the volatility of the S&P 500 index.

GM’s IV stands in the 46th percentile of its annual range and the 66th percentile of its most recent broad movement.

The price used for analysis was $34.27.

Premium: $1.16 Expire OTM  
GM-iron fly Strike Odds Delta
Calls
Long 36.50 90.4% 11
Break-even 35.66
Short 34.50 57.6% 44
Puts
Short 34.50 41.9% 56
Break-even 33.16
Long 32.00 88.9% 10

The premium is 52% of the width of the position’s wings.

The risk/reward ratio is 1.2:1.

Decision for My Account

I have entered a position on GM as described above. The stock at the time of entry was priced at $34.25.

By Tim Bovee, Portland, Oregon, April 27, 2017

2 thoughts on “GM Analysis

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