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.
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