Is it time to reconsider investing in General Motors Company (NYSE:GM)? GM stock rocketed more than 14% higher last week after SoftBank announced a $2.25 billion investment in GM’s autonomous vehicle unit.

But auto stocks have been under pressure for some time, mostly due to U.S. tariffs and trade war fears. What’s more, given the political volatility surrounding the auto sector, it’s looking even more profitable to fade this GM stock rally.

Let’s start with the SoftBank details. A little over two years ago, General Motors bought autonomous driving startup Cruise for $1 billion. Analysts criticized the deal as GM overpaying for an unproven technology. SoftBank’s investment validated that acquisition.

According to the terms of the investment, SoftBank Vision Fund will pay out $900 million initially, with another $1.35 billion once Cruise vehicles are commercially ready.  SoftBank will own a 19.6% stake in GM Cruise and hold a seat on the company’s board. The investment will be held in a preferred security that can be converted to GM common stock after seven years.

That’s the good news.

The bad news is that the U.S. has slapped tariffs on imported steel and aluminum, as well as auto and auto parts imports. In short, costs are going to rise for U.S. automakers, and they are going to pass them along to consumers who are already dealing with rising interest rates and inflation.

These tariffs aren’t doing auto stocks any favors, pressuring a group of stocks that was already in decline this year.  Furthermore, this weekend’s breakdown in trade talks between the U.S. and China are complicating matters further.

Click to Enlarge Short-term, GM stock traders are eating the news up. The shares are up more than 14% since the SoftBank announcement, and GM stock is now trading just shy of annual high territory. That said, the stock faces stiff resistance in the $44-$45 region. What’s more, GM stock is also firmly in overbought territory.

In other words, the shares are primed for a reversal.

There is one aspect of GM stock’s sentiment backdrop that could keep this rally going. According to Thomson/First Call, only nine of the 24 analysts following the shares rate them a “buy” or better. Also, the 12-month price target currently rests just overhead at $47.52. Upgrades or price-target increases could be a boon. However, given that analysts were quiet on the SoftBank news, I don’t see any action on this front in the near future.

Turning to GM options, we find that speculative traders are buying into the SoftBank hype. Currently, the July put/call open interest ratio weighs in at a lowly 0.61 — a near-term high for optimism on GM stock.

That said, most call OI in the July series is concentrated at the in-the-money $40 and $43 strikes. In other words, if these are bullish bets, we could see profit taking kick in this week.

Overall, July implied volatility for GM stock is pricing in a potential move of more than 6.5% for the shares through expiration.  This places the upper bound near $46 and the lower bound at about $40.

2 Trades for GM Stock

Put Spread: With GM trading near technical resistance and in overbought territory, a short-term reversal is definitely in the cards. A round of profit taking is all it would take to spark a selloff and send GM down to support near $40. Traders looking to take advantage of this reversal might want to consider a July $41/$42 bear put spread.

At last check, this spread was offered at 34 cents, or $34 per pair of contracts.  Breakeven lies at $41.66, while a maximum profit of 66 cents, or $66 per pair of contracts, is possible if GM stock closes at or below $41 when July options expire.

Put Sell: If you are looking for a more conservative play, then a July $39 put sell may be more your speed. At last check, this put was bid at 23 cents, or $23 per contract. The upside to this put sell strategy is that you keep the premium as long as GM stock closes above $39 when July options expire. The downside is that should GM trade below $39 ahead of expiration, you could be assigned 100 shares for each sold put at a cost of $39 per share.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.