We were assigned shares of General Motors (GM) last week at $38. Factoring in the large net debit we were carrying on the position, our cost basis is significantly above the current share price.
However, as I have been saying, this is a long-term position in a core stock that is grossly undervalued and a tremendous cash generator. At its core (get it), this is a climate change play.
I believe GM’s manufacturing approach will enable it to produce electric vehicles across its brands faster and more efficiently than its competitors. And I expect the company to have a large EV footprint in North America within four to six quarters.
That being said, I do not want to take any unnecessary risk by holding a position through the company’s earnings announcement, which is scheduled for Jan. 31. Therefore, I am recommending we sell an in-the-money call today with the goal of having our shares called away at the end of the week. Once we see how the market responds to General Motors’ results, we will re-enter the position by selling a put.
Note that this trade is only for members who own GM shares uncovered from a previous position.
Current Stock Price: $36.44
Cost Basis: $47.32
Action: Sell to open GM Jan Week Four (1/27) 36 Call
Current Option Price: $0.83-$0.85
Recommended Limit: Set your initial limit order at $0.84, but adjust as needed to sell a call today
New Cost Basis: $46.48
Expiration: After the close on Friday, Jan. 27
Potential Rate of Return: I am targeting breakeven for this position