General Motors reported earnings of $2.8 per share for the last quarter, beating the Zacks Consensus Estimate of $2.28. This is a surprise of +22.81%. In the same quarter last year, GM earned $2.96 per share. Over the past four quarters, GM has outperformed earnings estimates every time. The company generated $48.59 billion in revenue for the quarter ending September 2025, exceeding expectations by 9.76%. This is a slight decline from $48.76 billion in the previous year. GM has also met revenue estimates all four times in the last year. Since the beginning of the year, General Motors shares have risen by about 8.9%, while the S&P 500 has increased by 14.5%. Although GM has not kept pace with the market, their earnings outlook may indicate future trends. Currently, GM holds a Zacks Rank of #3 (Hold), suggesting the stock might align with market movements soon. Lucid Group, another company in the same industry, is set to release its earnings on November 5. They are expected to report a quarterly loss of $2.32 per share, with projected revenues of $325.59 million, a 62.8% increase from last year. After General Motors beat earnings and revenue expectations, the implied volatility for GM options dropped significantly. Before this announcement, implied volatility was likely above 45%, but now it is contracting towards 35%. This “volatility crush” means that anyone holding options may have lost value, even if the stock price goes up. The strong earnings surprise of more than 22% may lead to a rise in the stock price in the coming weeks. For those optimistic about GM’s continued strength, selling out-of-the-money put credit spreads can be a smart strategy to earn premiums, benefiting from both an increasing stock price and the decline in option volatility. However, we must consider the overall economic landscape and GM’s performance. Revenues did not grow compared to last year, and the stock has underperformed against the S&P 500 in 2025. Additionally, auto loan delinquency rates recently hit 2.8%, the highest since the financial crisis in 2010, creating challenges for the entire automotive sector. The industry is currently weak, ranking among the bottom sectors, indicating this is not just a GM issue. Demand has slowed throughout 2025, as higher interest rates—significant in 2023 and 2024—make financing new vehicles costly for buyers. A single strong quarter for GM might not be enough to counter this broader trend. This situation presents a relative value opportunity, especially compared to competitors like Lucid, which expects another major loss on November 5. A potential strategy could involve buying GM calls while also purchasing puts on Lucid (LCID). This bet anticipates that the market will reward GM’s profitability while punishing competitors struggling with cash flow and production challenges. In conclusion, the most important aspect will be what management says during today’s earnings call. We need to pay close attention to their guidance on fourth-quarter demand and profit margin outlook for 2026. Any hint of caution could quickly erase today’s gains, making it wise to keep any new positions small until there is better clarity on their forecasts.

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