Some analysts are predicting Ford Motor Company (F), Chrysler (DCX) and General Motors (GM) may turn out to be big winners as a result of the Democrats newly acquired power in the House of Representatives. Particularly, it is because Rep. John Dingell is the most likely candidate to become the chairman of the House Energy and Commerce Committee ( reuters.com ).
The form of relief will likely be a deal where federal money will be used to alleviate the two automakers of their worker and retiree health care burden. This has been long described as the albatross around American automaker’s neck since foreign companies do not have a comparable cost. To add credence to this notion, Senator Barak Obama D-Ill has proposed a similar bill in the Senate.
This would be a natural first step for the Democrats to take toward a national health care initiative, as this would cover nearly 500,000 current and former automobile manufacturing employees. Also, US auto executives have expressed frustration with the Bush administration’s energy policy and failure to protect intellectual property and are turning to the Democrat’s for relief ( moneycentral ).
Rep. Dingell would not push the traditional Democratic position of tougher fuel economy standards because of fears of how it might affect the automobile industry. Instead, Dingell wants the automobile industry to focus on Diesel and alternative fuels.
Keeping this information in mind, we will consider a December covered calls stock option investment strategy assuming Ford and GM will gain as this news becomes more widely accepted and takes root.
PowerOptions StrategySearch Summary Tool for GM and Ford’s December covered calls stock option investment strategy yielded the following results:
| Covered Calls GENERAL MOTORS CORP (GM) $34.70 – FORD MOTOR CO (F) $8.63 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Company | Expiration &Strike |
Opt. Bid |
%Dnsd. Prot |
%If Unch. |
%If Asgnd |
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| GM | 06 DEC 35.00 | $1.30 | 3.70% | 3.90% | 4.80% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| F | 06 DEC $9.00 | $0.25 | 2.90% | 3.00% | 7.40% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The GM covered calls stock option investment strategy position offers respectable downside protection (3.7%) and potential profit (4.8%) if assigned. The Ford covered calls stock option investment strategy position offers less downside protection (2.9%) but greater potential profits (7.4%) if assigned. Many analysts also consider Ford’s stock price to have been beaten up in the last few months and investors may have over corrected – perhaps an additional reason to be bullish on Ford (articles.moneycentral.msn.com).
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[tags]DCX, DaimlerChrysler AG, F, Ford Motor Co., GM, General Motors Corp., covered call investment strategy, covered call options, investment strategy, iron condor, option income, poweroptions, stock option trading, stock options, covered calls [/tags]