OK...silly question but... (bankruptcy, buy, sell, companies)

[drjones96]

...Is anybody thinking about or has anybody already...

...bought stock in GM?

I'm seriously thinking about dropping a small amount of cash on some shares. Small enough that if I lost it all it wouldn't hurt my feelings but large enough that if it paid off I would be

So what say you folks about this idea? Stupid? Smart? Do it and see what happens?

[chet everett]

Lots of people got the same urge for United Airlines, Continental Illinois National Bank, Montgormery Ward and a whole lot of other companies: Corporate Bankruptcy Famous Bankruptcies Texas Lawyer Houston Austin San Antonio

The trading activity is nothing than any normal investor who does not have access to the details of who is willing to write-off what should engage in...

[Nepenthe]

I bought some December calls ultra ultra cheap. My play there is a short-term rally in GM due to a bailout announcement. GM goes up 100%, my calls might go up 2000%. GM stays down, I lose my $40. I don't think I'd buy actual stock shares.

[drjones96]

Originally Posted by Nepenthe

...I don't think I'd buy actual stock shares.

OK for the 'wet behind the ears' investor....wtf are you talking about?

[Driller1]

Hubby did that with K-mart. $5000. Lost it all. They start trading on a different market.

[drjones96]

Originally Posted by Driller1

Hubby did that with K-mart. $5000. Lost it all. They start trading on a different market.

Yeah...no way I'd drop that kind of coin on something this risky. I'm talking about $100-$200.

But...if I could pick it up for $3/share and then the share price went back up to the nominal $30ish that it has been since the early 80's that would be pretty cool no?

[Nepenthe]

Option (finance - Wikipedia, the free encyclopedia)

I considered straddling/strangling (buying calls AND puts at the same time and profiting if the stock moves a lot regardless of direction) but decided I didn't want to put much thought into it (and the puts were much more expensive) so I just bought calls.

Basically, my call contracts give me the right to purchase shares of GM at a certain price -- the strike price. Since I'm a purchaser (rather than seller) of calls (rather than puts), I'm bullish on GM (I profit if it goes up).

Let's say you have stock ABC trading at about $10/share. You buy one call contract to purchase 100 shares of ABC at $15/share. The contract is "out of the money" because it does you no good to exercise your right at the current market price. But if the market price of the stock goes to $18 before your calls expire, now you're in the money and you have the right to buy at $15 something that you can turn around and sell for $18/share.

In reality, most options traders do not hold until expiration. And the underlying stock or ETF or index doesn't actually have to go in the money to profit on the option itself -- you can SELL your call at any time. So in the above example, if ABC goes from $10 to $12, the calls might increase in price and you might decide to sell them for a profit.

I have recently seen a variety of different options contracts move 400%, 500% or more IN ONE DAY. Last Thursday you could have made a 700% profit in two hours with the right contract and timing. When buying calls, your maximum liability is what you paid for the options, while your maximum gain is theoretically unlimited.

[killer2021]

GM is more of a short term play on if they get the bailout money or not. It is an all or nothing type of thing. Either you make money or you go bust on your investment.

[Nepenthe]

Originally Posted by drjones96

Yeah...no way I'd drop that kind of coin on something this risky. I'm talking about $100-$200.

But...if I could pick it up for $3/share and then the share price went back up to the nominal $30ish that it has been since the early 80's that would be pretty cool no?

I'd be enormously surprised if it ever did that. Long term, I see doom for this particular common stock. Short term, I'm willing to place a $40 bet that it will rally a bit (say, from $3 to $6) with incoming government money. My $40 could become $400, and that chance is worth $40 to me. I'm not willing to do much more than that.

If GM files ch. 11, shares of the symbol "GM" will almost certainly be declared worthless (no shareholder's equity) at some point due to the order of importance of various stakeholders. GM could certainly emerge with a publicly-trading stock, but it would be a new stock with a new CUSIP and (probably) a new symbol.

Originally Posted by killer2021

GM is more of a short term play on if they get the bailout money or not. It is an all or nothing type of thing. Either you make money or you go bust on your investment.

Exactly.

[drjones96]

Originally Posted by Nepenthe

Option (finance - Wikipedia, the free encyclopedia)

I considered straddling/strangling (buying calls AND puts at the same time and profiting if the stock moves a lot regardless of direction) but decided I didn't want to put much thought into it (and the puts were much more expensive) so I just bought calls.

Basically, my call contracts give me the right to purchase shares of GM at a certain price -- the strike price. Since I'm a purchaser (rather than seller) of calls (rather than puts), I'm bullish on GM (I profit if it goes up).

Let's say you have stock ABC trading at about $10/share. You buy one call contract to purchase 100 shares of ABC at $15/share. The contract is "out of the money" because it does you no good to exercise your right at the current market price. But if the market price of the stock goes to $18 before your calls expire, now you're in the money and you have the right to buy at $15 something that you can turn around and sell for $18/share.

In reality, most options traders do not hold until expiration. And the underlying stock or ETF or index doesn't actually have to go in the money to profit on the option itself -- you can SELL your call at any time. So in the above example, if ABC goes from $10 to $12, the calls might increase in price and you might decide to sell them for a profit.

I have recently seen a variety of different options contracts move 400%, 500% or more IN ONE DAY. Last Thursday you could have made a 700% profit in two hours with the right contract and timing. When buying calls, your maximum liability is what you paid for the options, while your maximum gain is theoretically unlimited.

OK I see.

Originally Posted by Nepenthe

I'd be enormously surprised if it ever did that. Long term, I see doom for this particular common stock. Short term, I'm willing to place a $40 bet that it will rally a bit (say, from $3 to $6) with incoming government money. My $40 could become $400, and that chance is worth $40 to me. I'm not willing to do much more than that.

OK how do you pull $400 out of $40 if the stock price only doubled ($3 to $6)?