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Option Activity Alert: Research In Motion Limited and General Electric Company

The smartphone stock is drawing substantial call volume ahead of a new product launch

by 7/29/2010 11:40:00 AM
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General Electric Company

Puts were the options of choice on GE yesterday, as traders on the ISE bought to open 2,344 of these bearishly oriented contracts. By comparison, just 912 calls were purchased on GE during the course of Wednesday's trading, netting the shares a single-day ISE put/call volume ratio of 2.57.

The day's downbeat option activity seems to be part of a growing trend, as GE sports an inflated 10-day ISE put/call volume ratio of 0.79, in the 82nd annual percentile. In other words, traders on this exchange have purchased puts over calls at a faster clip just 18% of the time during the past year.

GE SOIRIn the same skeptical vein, GE's SOIR is hovering near annual-high territory. The stock's SOIR of 1.14 indicates that puts outnumber calls among options slated to expire within the next three months, and this ratio ranks higher than 98% of comparable readings taken during the past year -- just two percentage points from a pessimistic peak.

Put players on Wednesday honed in on GE's September series of options. The stock's September 11 put was most active, with 6,720 contracts crossing the tape. About 99% of these puts traded at the ask price, indicating they were purchased, and open interest climbed overnight by 6,624 contracts, confirming the addition of new bearish bets.

On the other hand, short sellers are virtually ignoring GE. The stock's short-to-float ratio stands at a scant 0.7%, suggesting that the bears prefer to express their skepticism via puts.

This negative sentiment from options traders seems in line with GE's recent technical troubles. The stock is currently battling pressure from its 160-day and 200-day moving averages, which have conspired to keep GE pinned beneath the $16.50 level since late May.

Daily Chart of GE since April 2010 With 160-Day and 200-Day Moving Averages

However, during the short term, heavy put open interest could actually work in GE's favor. The stock's out-of-the-money August 14 and 15 put strikes carry a combined total of 65,118 contracts in open interest, which could provide options-related support as expiration draws closer.




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