Guest kawikaho Posted April 29, 2009 Share Posted April 29, 2009 Hi folks, I'm wondering what others think about GMRV puts. The strike price is 1, and the asking price is around .33. The risk is 100% of lost capital, the reward, at most, will be 200% (I believe). Any thoughts? Link to comment Share on other sites More sharing options...
Cardboard Posted April 29, 2009 Share Posted April 29, 2009 Kawikaho, I think that there is an opportunity here, but the exact opposite of what I believe you are thinking: writing these puts. While I agree that GM shares are essentially worthless and I was previously short the stock, I don't believe that they will trade right to $0 following the June 1 restructuring deadline imposed by the U.S. government. If you look at other companies that have worthless stocks that have essentially been taken over by the U.S. gov't: FRE, FNM and AIG, they are all trading in the $1 range. And this has been going on for a long time since their "default event". So considering this weird phenomenon, the time that it will take for GM to get a reasonable restructuring plan together and the slim possibility for GM shares to recover, I would not buy these puts. Cardboard Link to comment Share on other sites More sharing options...
Guest kawikaho Posted April 30, 2009 Share Posted April 30, 2009 Much thanks. Yeah, good call. I didn't take that into consideration. Link to comment Share on other sites More sharing options...
Smazz Posted April 30, 2009 Share Posted April 30, 2009 I was actually considering writing calls. Link to comment Share on other sites More sharing options...
Guest kawikaho Posted May 1, 2009 Share Posted May 1, 2009 Are you still interested in writing calls after what happened to Chrysler? Link to comment Share on other sites More sharing options...
Smazz Posted May 1, 2009 Share Posted May 1, 2009 I dont know if yours is a true question or rhetorical but what happened to Chrysler is what I thought would happen. I wrote about it in a thread months ago. About the writing the calls - I would be talking about some short term close to money but they arent paying enough to convince me. Link to comment Share on other sites More sharing options...
Guest kawikaho Posted May 1, 2009 Share Posted May 1, 2009 I wasn't being facetious. So, you would go long GM? Why? I think it's definitely risky to short the common because any last minute financing deal will cause the stock to explode and kill the shorts, but I don't think GM is going to make it. Why do you? Link to comment Share on other sites More sharing options...
Smazz Posted May 1, 2009 Share Posted May 1, 2009 writing the calls is actually opposite buying the calls. Yes, its like the shorting but you make if the stock goes nowhere (which I think it will do at best), you get the premium unlike shorting where you are "supposed" to pay interest. Link to comment Share on other sites More sharing options...
Guest kawikaho Posted May 1, 2009 Share Posted May 1, 2009 Ahhh... ok, i'm pretty new to options. That makes sense. You get paid to write the call options by selling them to people who think the stock will go up. However, if you don't think that will happen, then you make out by not having to make due on the contract. But, what if the stock does go up drastically, and the calls are reined in? Don't you lose out at that point? Link to comment Share on other sites More sharing options...
Smazz Posted May 1, 2009 Share Posted May 1, 2009 yep. Like the saying goes "if it was easy, everyone would be doing it" ;) Link to comment Share on other sites More sharing options...
Smazz Posted May 12, 2009 Share Posted May 12, 2009 Looks like the fat lady is clearing her throat! Link to comment Share on other sites More sharing options...
bablu Posted May 12, 2009 Share Posted May 12, 2009 looks like it's matter of time it bites the dust (under a buck) ;) Link to comment Share on other sites More sharing options...
Guest kawikaho Posted May 12, 2009 Share Posted May 12, 2009 Yep, I bought the puts. Puts are up almost 40% since I bought them. Looks like all the execs are selling out. GM is going for bankruptcy. I wonder what sort of implications that will have for the economy. Link to comment Share on other sites More sharing options...
Smazz Posted May 12, 2009 Share Posted May 12, 2009 I dont think it will have as much as the fear mongers were trying to achieve. The hard assets/trademarks etc will prob be allowed to continue along their course with ownership changing hands. Its basically skimming along the ocean floor here with respect to most aspects of the buisness so the ripple, I believe is not going to be anything like the sunami we saw over the last 6 months. The continuation of the housing debacle and credit market will be more of a catalyst. Link to comment Share on other sites More sharing options...
Guest kawikaho Posted May 13, 2009 Share Posted May 13, 2009 Thanks for the response. BTW, what happens to the value of the puts if GM goes into Ch. 11? Right now, the value of those puts are up 60%. I'm thinking about just selling them. Link to comment Share on other sites More sharing options...
Smazz Posted May 13, 2009 Share Posted May 13, 2009 with all due respect, when you are dealing with derivatives not as a hedge, it is purely speculation so - if I were you, if youve made a profit, take a profit. Link to comment Share on other sites More sharing options...
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