GM stock to follow pattern of FNM and FRE?

Discussion in 'Stocks' started by VoodooMMI, May 28, 2009.

  1. If GM files for a bankruptcy reorganization on or about June 1st, 2009, I think the GM stock may follow the pattern of FNM or FRE when they were placed into conservatorship of the FHFA. FNM and FRE still trade but were wacked down pretty hard on the announcement. I expect GM to be knocked down below $1.

    Right now I'm short some GM June 1 Calls. If GM makes a Chapter 11 announcement, I expect these calls to follow the stock lower and there is a good chance that they could expire worthless on or around June 20th.

    Agree or Disagree and why?
  2. shorting calls on a $1 stock does not seem very smart to me. you never know what politicians might do over the weekend.
  3. TM1982


    So are you selling puts then? You need to do the puts or call, which are you doing? And don't say "staying away".. that's dumb. There is a trade to be had here.
  4. Good point. That's why it's important to keep your position small relative to your overall portfolio. GM is expected to make a bankruptcy filing on or about June 1st. If they don't or if the politicians bailout existing stockholders of GM, then the stock could zoom next week. But if they do file next week, GM stock will probably be removed from the DJIA and S&P 500. Therefore, money tied to those indexes will be selling GM putting downward pressure on the stock.

    As always, the safest position is a flat one. However, I'll take a small bearish position and see how it plays out.
  5. staying away. the good fruit has been picked off this tree already.
  6. anybody playing the GM single stock futures against the options?
    GM June Futures trading $0.56 to $0.62