General Motors (GM) Options for Income: Strategies for an Undervalued Auto Stock
GM's Value Proposition
General Motors trades around $50 at roughly 5-6x forward earnings, making it one of the cheapest large caps in the market. The company is profitable, buying back stock aggressively, and growing its dividend. The discount reflects skepticism about the EV transition and cyclical auto industry concerns.
IV runs 30-38%, elevated for a stock this cheap on traditional metrics. Options sellers benefit from the disconnect between the low fundamental valuation and the high options pricing.
Covered Call Strategy
With GM at $50, one contract requires $5,000, a manageable position size for most accounts.
| Strike | DTE | Premium | Annualized |
The $53 call for $1.25 monthly is strong. You keep 6% of upside room and earn 30% annualized yield. Even the conservative $55 strike delivers 19%, well above what you would earn on a savings account or treasury bill.
Strategy Selection by Market View
Bullish on autos: Sell the $55 call (15-delta). Collect 19% annualized while preserving 10% upside.
Neutral: Sell the $53 call (25-delta). Maximize income in a sideways market.
Want to exit gradually: Sell the $51 call (40-delta). High premium, frequent assignment. Use this to systematically sell your position at slightly above market price.
Put Selling Approach
GM finds support in the $42-45 range, where the buyback program creates natural buying pressure. Selling the $45 put (10% OTM) for $0.80-1.00 at 30 DTE is a solid entry strategy.
At $45, GM trades at roughly 4.5x forward earnings. Even if the auto cycle softens, this valuation provides a cushion. Getting assigned at $44 (after accounting for premium) puts you in a deeply discounted position.
Dividend Integration
GM currently pays $0.12 per quarter ($0.48 annually, roughly 1% yield). The dividend is growing and well-covered by earnings. While not a major income component, it adds to the total return.
Combined income on GM:
Earnings and Cyclical Risk
GM reports earnings quarterly with typical moves of 4-8%. The company has a pattern of beating estimates and raising guidance, only to see the stock sell off on forward concerns. This is frustrating for shareholders but helpful for covered call sellers because the stock tends to revert to its range.
Cyclical risk is the real threat. If a recession hits, auto sales drop 20-30%, and GM's earnings could be cut in half. The stock would likely fall to $30-35 in that scenario. No amount of options premium fully protects against a cyclical downturn.
Hedging approach: Use a portion of your covered call premium to buy $40 puts as downside protection. The cost is roughly $0.50-0.60 per month, consuming about 40-50% of your call premium income. This collar structure limits your downside to about 20% while still generating 15% annual income.
The Buyback Tailwind
GM is buying back $10+ billion in stock over 2024-2026. At $50 per share, that is roughly 4% of the outstanding shares each year. This buyback creates a structural bid under the stock, supporting prices during pullbacks and reducing the probability that short puts get tested.
For options sellers, buybacks are an underappreciated positive. They reduce the probability of extreme downside moves, which is exactly the risk you are taking as a seller.
Who Should Trade GM Options?
GM options suit value-oriented income traders who are comfortable with cyclical risk. The premiums are rich, the valuation is cheap, and the business is throwing off cash. The main risk is macro, not company-specific.
OptionsPilot's covered call finder ranks GM among the top income-generating industrials, showing real-time premium yields and probability metrics so you can pick the right strike for your risk tolerance.