I said in this week’s Live Trading Session that I was interested in potentially opening new trades in General Motors (GM) and Twitter (TWTR) following the companies’ earnings announcements.
TWTR was up as much as 15% today following an earnings and revenue beat, despite failing to hit analysts’ user growth expectations. I want to wait to see where shares settle before recommending a trade on the stock.
GM, on the other hand, is setting up for a great put selling opportunity. The company reported fourth-quarter earnings and revenue that beat analyst estimates. However, management warned that revenue could be cut by up to $2 billion this year due to a global semiconductor chip shortage.
Personally, I think management was just being cautious in an effort to give Wall Street a heads up on a potential problem.
The stock is down more than 4% today, causing option premiums to rise and giving us an excellent opportunity to sell a put.
Current Stock Price: $53.41
Action: Sell to open the GM Feb Week Two (2/12) 52.50 Put
Current Option Price: $0.45-$0.49
Recommended Limit: Set your initial limit order at $0.47. You can go as low as $0.40, but please don’t start there and always use limit orders.
Expiration: After the close on Friday, Feb. 12
Potential Rate of Return: 0.9% in three days, or 109% on an annualized basis, if this option expires worthless