timwest
Long

General Motors GM Daily How to make money the old fashioned way

NYSE:GM   GENERAL MOTORS COMPANY
135 0 2
.... I know the saying is "...to earn it." Courtesy of EF Hutton's famous 1980's tv commercials. But in some ways this is EARNING the money because in order to make this profit you need to become the insurance company. Being an insurance risk manager is a full time job and this trade may seem boring, but it does involve some risk.

The key here is that you have to have enough money in your account to stand ready to buy the shares of GM             at the lower price, in this case $27/sh. Every contract you sell, you earn $0.55 (current bid) or $55 and you then are obligated to purchased shares of GM             for $2700 until December 20, 2014 when the contract expires.

That is more than 20% below today's prices and at that level you would be earning a 4.44% dividend yield, which is very attractive. You would also be buying GM             shares at the same price that the company stands ready to buy them for their treasury account. I think that makes sense to me.

The $55 earnings is what you earn for insuring against a severe market decline. GM             has already declined from an outlandish $42 a share in December and touched as low as $32 in the correction.

I think this $55 return is better than holding T-Notes.

Sometimes boring is good. This is a limited-return, boring strategy, but it works.

Consult your financial advisor to see if it is right for you.

Tim 10:53AM EST 5/12/2014
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