Options traders appear to be split down the middle when it comes to prospects for General Electric Co. (GE: sentiment, chart, options). For instance, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.00 indicates that put and call open interest is practically dead even among options with less than three months until expiration. Furthermore, GE's SOIR also ranks near the middle of its annual range, underscoring the relatively mixed view among options speculators.
Today's activity in the options pits takes this comparison one step further, as a pair of options traders appear to have taken diametrically opposed positions on the security. On one hand, we have what appears to be a long vertical call spread on GE, centering on the December 17 and 19 call strikes. On the other hand, another options trader has initiated a long vertical put spread on GE at the November 16 and 15 puts.
A Long GE Vertical Call Spread
Taking up the bullish banner for GE, a trader bought 9,050 December 17 calls for the ask price of $0.31, or $31 per contract. The contracts traded on the American Stock Exchange (AMEX) at 11:04 a.m. Eastern time, and were marked "spread." The second leg of this spread took place on the December 19 strike, where 9,050 calls traded at the same time on the same exchange for the bid price of $0.06, or $6 per contract.
The trader incurred a debit of $280,550 -- (0.31 * 100) * 9,050 = $280,550 -- by purchasing the December 17 calls, which was partially offset by a credit of $54,300 -- (0.06 * 100) * 9,050 = $54,300 -- for selling the December 19 calls. The total cost of this trade comes in at $0.25 -- 0.31 - 0.06 = 0.25 -- or $25 per contract. The objective of this position is for GE to rally to $19 per share by the time these options expire on Dec. 18. Should this occur, the trader would pocket a premium of $1.75 -- (19 - 17) - 0.25 = $1.75 -- or $175 per contract. Below is a chart for a rough visual representation of the trade's profit/loss scenario:
A Long GE Vertical Put Spread
Representing the bearish expectations for GE, a trader bought 2,235 November 16 puts for the ask price of $0.43, or $43 per contract. The contracts traded on the Chicago Board Options Exchange (CBOE) at 11:24 a.m. Eastern time, and were marked "spread." The second leg of this spread took place on the November 15 strike, with 2,235 puts crossing at the same time on the same exchange for the bid price of $0.10, or $10 per contract.
The trader incurred a debit of $96,105 -- (0.43 * 100) * 2,235 = $96,105 -- by purchasing the November 16 puts, which was partially offset by a credit of $22,350 -- (0.10 * 100) * 2,235 = $22,350 -- for selling the November 15 puts. The total cost of this trade comes in at $0.33 -- 0.43 - 0.10 = 0.33 -- or $33 per contract. The position reaches its maximum profit potential if GE falls to $15 per share by the time these options expire on Nov. 20. In the event that GE drops to $15 per share on expiration, the trader would pocket a premium of $0.67 -- (16 - 15) - 0.33 = $0.67 -- or $67 per contract. Below is a chart for a rough visual representation of the trade's profit/loss scenario:
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