Ride Along With This Auto Play

It was a strong year for auto sales in 2012. The industry continues to rebound to an annual production rate of more than 15 million domestic vehicles after posting less than 10 million in sales at the nadir of the financial crisis. The first month of the new year shows this trend continuing. January sales rose 14% compared with the same period in 2012. Truck sales are accelerating significantly as the housing market continues to recovers and construction activity picks up.

I own two of the big three domestic automakers, General Motors (GM) and Ford (F), via a position in slightly out-of-the-money long-term call options. Both stocks are cheap, but I don't hold the equity directly as the absence of volatility makes the option premiums cheap. In addition, both companies have huge and poorly performing European operations that I am concerned could get much worse if we hit any kind of additional headwinds in the European debt crisis. Most of the auto-parts makers also have had nice runs over the last couple of months; though many of them, such as TRW Automotive Holdings (TRW), have approximately half their sales powered by Europe....248 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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