We have call positions in core stocks General Motors (GM) and Pfizer (PFE) expiring today. Both companies are scheduled to report earnings on Tuesday.
Our GM shares are on track to be called away. Our cost basis is much higher than the current share price, which means we will have a large net debit on the position. Once we see how the market responds to General Motors’ results, we will re-enter the position by selling a put to generate income and reduce our net debit.
If GM happens to reverse today and close below our call’s strike, we will exit the position by selling our shares on Monday.
Our Pfizer call is on track to expire worthless. However, I am recommending we buy it back for a few cents so we can sell our shares to avoid the company’s earnings report. This will incur a large net debit on the position, as our cost basis is much higher than the current share price.
As with GM, we will sell a put on PFE after earnings to generate income and reduce our net debit.
GM Jan Week Four (1/27) 36 Call
Current Stock Price: $37.20
Cost Basis: $46.48
Action: Allow shares to be called away
Net Debit: $10.48
Potential Rate of Return: I am targeting breakeven for this position
PFE Jan Week Four (1/27) 48 Call
Current Stock Price: $44.07
Cost Basis: $59.86
Action:
- Buy to close the PFE Jan Week Four (1/27) 48 Call for around $0.01, but adjust as needed to close today
- Sell shares at market
Net Debit: $15.80
Potential Rate of Return: I am targeting breakeven for this position