General Motors (GM) blew through analysts’ earnings estimates for the third quarter this morning. It also reported a 10% year-over-year revenue increase for the first nine months of the year thanks to higher vehicle prices. However, the stock is selling off after CEO Mary Barra said she expects the semiconductor shortage to extend through the first half of next year.
I believe today’s 4%-plus drop in shares is a short-term trading event. We can capitalize on the elevated post-earnings volatility by selling a put.
We have a net debit on GM, so the income we generate will go toward reducing that. However, GM is one of our core stocks that I plan to trade with great frequency. So, feel free to enter this position even if you were not in the previous one. Just be aware that we will be tracking and managing it based on the ongoing position.
Current Stock Price: $54.88
Net Debit: $2.30
Action: Sell to open the GM Oct Week Five (10/29) 54 Put
Current Option Price: $0.31-$0.36
Recommended Limit: Set your initial limit order at $0.33, but adjust as needed to sell a put today
New Net Debit: $1.97
Expiration: After the close on Friday, Oct. 29
Potential Rate of Return: I am targeting breakeven for this position