GM: Can it Take the Driver's Seat?

Auto sales should finish last year, when the final numbers are all in, at a three-year high. With momentum on its side, auto industry sales are now poised be able to improve on last year's performance. If so, that would be highly welcome news for our industrial production and the stock market in general.

Believe it or not, General Motors (GM) is the U.S. sales leader in the auto industry with a market share of 19%. That is pretty good for a company that basically was coming "off the canvas" while "reeling on the ropes" only a few short years ago.

There's an old market truism related to sentiment about a stock that goes like this: It is hard for a cat to cozy up to a warm stove after being burned by a hot one! GM was a "hot stove" that singed many a GM believer, perhaps permanently. The "cats" are the fund managers who got singed. The warm stove is GM now, a new and improved version of what was once a great company and maybe will be so once again!

Regardless of any long-term positives possibly ahead for GM, the speculative approach to GM is now revving up. Seasonally the autos tend to be a good long side speculation at the beginning of any New Year. This year should offer that opportunity once again.

Let's review the T3/OP video with Jill and Scott as they walk through the charts for GM, F and the comment on the auto group:



Consider an options trade geared for playing GM to attempt to move up to higher prices in the short-term. The strategy I like for a GM options trade is the bullish vertical call spread, one that expires in June.

This trade is medium in risk because it is a controlled, while medium in potential reward because it is a hedged trade, a strategy that caps the profit.

Trades: Buy to open 3 GM June 20 calls for $2.30 and sell to open 3 GM June 25 calls at $0.60.

The total risk for the spread is the premium paid, or $1.70. As always, I will monitor the trade on this site in the comments section below.

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This complimentary article from Options Profits was originally published on January 3 at 8:40am EST. Don't risk missing over 40 options trade ideas every week and exclusive commentary from over 10 experts. Click here for more information.
At the time of publication, Skip Raschke, Jill Malandrino and Scott Redler held no positions in the stocks or issues mentioned.