On 9/26/08, I BTC 6 GM Dec08 12.50 Puts and STO 6 GM Jan10 12.50 Puts for a net deposit of $1174.99 in my taxable account.  My basis for these GM shares if assigned would now be 7.89.

With GM at 9.14 as of this writing if it is assigned to me right now I could sell it and still make a profit.  Actually, I would like for that to happen.

The reason for this trade, of course, is to raise some additional cash in my taxable account and to attempt to defer the potential assignment of the stock.  There’s no guarantee on the deferral though.  At least if it does happen I have a little more latitude as to whether I keep it and sell Covered Calls or just sell the stock.

This morning I rolled out and up 12 GM Sep08 12.50 Covered Calls.  I BTC 12 GM Sep08 12.50 Calls and STO 12 GM Dec08 15 Calls for a net deposit of $406.02 in two IRA accounts.  My basis for these GM shares is now 13.09 and 19.51.

I originally acquired these GM shares for the dividend of .25 per quarter and for the option premiums.  Since then GM has “suspended” its dividend which leaves only the option premiums.  My return on the option roll outs is not that great here, being around 5% annualized.  However, I have increased the strike price by 2.50 or $1500 per account.  This also set me up to either roll the calls out (and possibly up) again or, if they expire, to sell new ones for an even greater return.

GM seems to be moving up lately because of potential Federal loans to auto makers (including Ford, Chrysler, and even foreign auto makers if they manufacture here).  That would certainly help some of their cash flow problems and indicates that the Feds do not intend to let them fail.

On 8/18/08 I STO 12 GM Sep08 12.50 Covered Calls for a net deposit of $459.00 in two IRA accounts.  My basis for these to sets of 600 GM shares is 13.43 and 19.85.

I am less happy with GM now that they have “suspended” their dividend for the foreseeable future.  I knew that might happen but it still doesn’t feel any better.  So, now GM does not match my investment philosophy or goals.  What do I do?  Since I am underwater on both sets of GM stock my regular readers know that I will probably not sell it, take the loss and move on.  Using the same reasoning as I just did for DYN in my prior post I see that my annualized return on my GM lot with basis at 19.85 is 30.41% and 58.86% on the current market price of 10.44.  As bad as GM appears, that return is nothing to sneeze at.  So, you can see why I continue to hold GM and sell Covered Calls each month even if they are not currently paying dividends.