General Motors Corp. (GM) PriceWatch Alert Up To 18.83% Return

Posted on Tuesday, July 22, 2008 8:07 AM

General Motors Corp. (NYSE: GM) closed yesterday at $13.09. So far the stock has hit a 52-week low of $8.81 and 52-week high of $43.20. General Motors stock has been showing support around 12.27 and resistance in the 14.13 range. Technical indicators for the stock are Bearish and S&P gives GM a neutral 3 STAR (out of 5) hold rating. GM appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Mar '09 10 covered call (GM CB) for a net debit in the $8.89 area. That is also the break even stock price for this trade. This covered call has a 242 day duration, provides 32.09% downside protection and a 12.49% assigned return rate for an 18.83% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the GM Jan '09 7.50 Call (GM AR) and selling the Mar '09 10 call (GM CB) for a $1.60 debit. The trade has a 242 day life and would provide 30.48% downside protection and a 56.25% assigned return rate for an 85.00% annualized return rate (for comparison purposes only). General Motors does not pay dividends at this time. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]