An October 21st, 2022 Covered Calls buy/write limit order was executed today in General Motors Company (ticker GM) at a net debit price of $31.38 per share. Five hundred shares were purchased at $34.53 and five Oct. 21st, 2022 $32.00 strike price Call options were sold at $3.15 per share. The corresponding extrinsic value (i.e. time value) was $.62 per share [$3.15 Call options premium - ($34.53 stock purchase price - $32.00 strike price)]. The Implied Volatility of the Calls was very high at 54.8 and the approximate probability of assignment at options expiration was 75.6% when this transaction was executed. There is no ex-dividend and, as I prefer, no earnings report prior to the options expiration date.
When this position was established it was 7.9% in-the-money which is consistent with my current cautious Covered Calls approach during a bearish market environment. GM's stock price has experienced a dramatic decline of 43% so far this year, but their current valuation is attractive--for example, their trailing twelve months P/E ratio is only 5.7. Their year-over-year sales have begun to inflect positive during the past two quarters and their Q3 2022 earnings are expected to show year-over-year improvements beginning this quarter when they report on October 25th. This positive trend should begin to benefit the stock price. Analysts' current average target price is $50.89 (+47.4% above today's purchase price).
Some key numbers for this General Motors Company Covered Calls position are:
Covered Calls Net Investment: $15,693.35
Profit if Assigned on Expiration Date: $306.65
Days Until October 21st, 2022 Options Expiration: 16
Absolute Return-on-Investment if Assigned at Expiration: +2.0%
Annualized Return-on-Investment if Assigned at Options Expiration: +44.6%
