Calls on GM

2018年2月5日

Based on a Monte Carlo Simulation (based on the last 252 trading days) the stock is trading below its par value of $42.48. I'd expect a downtrend reversal/surprise of 2-3% (historic trend) shortly after the earnings call Tuesday if GM can beat earnings per share expectations for 2017. Additionally, both ARIMA(0,1,0) and ARIMA(5,3,1) models are projecting the stock at 42.2 and 42.5 in 10 days, respectively.

From a fundamental standpoint, here are a few pointers:

• GM has consistently maintained profit margins over 5% which is greater than the industry average.
  
• GM's revenue will be lower this year due to slower vehicle sales in North America and due to selling their European operations (OPEL), which is already built into the price at this time
  
• Their efficiency is improving relative to their competitors, especially F and FCAU based on higher inventory turnover ratios
  
• The key metric to watch is GM's earnings per share which could beat expectations this year if GM can maintain sales of higher profit margin products (Trucks and SUV's) and based on the intensity of the share buy-back strategy
  
• Slight chance of an increased dividend yield for GM's stock which I believe to be the driving reason behind the share buy back strategy
  

Based on how the market opens Monday, I'll be betting with both Feb 16th and March 16th Call options with strikes ranging from 40 - 43, within the resistance range. I may also sell Puts at a $39 Strike, below the resistance level