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:
Discuss this article:
Post your own comment
More articles:
Chinese search sultan Baidu, Inc. (BIDU: sentiment, chart, options) will step into the earnings spotlight after the closing bell tomorrow, according to Thomson Reuters. While call volume has accelerated ahead of the event, digging deeper into the action indicates that not all of the activity has been bullishly oriented. read more...
Transocean LTD (RIG: sentiment, chart, options) was a popular target in the options pits on Friday, with both call and put volume surpassing the norm. More specifically, the offshore drilling diva saw about 19,000 calls and 19,000 puts cross the tape – nearly doubling its expected single-session volume of fewer than 9,900 calls and 10,000 puts. read more...
Call trading has picked up steam on commodities concern Plains Exploration & Production Company (PXP: sentiment, chart, options), according to data from the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE). During the past two weeks, speculators on the exchanges have bought to open almost four times as many PXP calls as puts, as indicated by the stock's 10-day call/put volume ratio of 3.84, in the optimistically skewed 64th annual percentile. read more...
While most near-term option traders have boarded HSBC Holdings plc's (HBC: sentiment, chart, options) bullish bandwagon, it appears one longer-term speculator may have a fear of commitment, buying both puts and calls to profit from a price swing in either direction. read more...
Best Buy Co., Inc. (BBY: sentiment, chart, options) is drawing some notable put spread activity today, with one neutral-to-bullish speculator zeroing in on the security's February 37 and February 35 strikes. So far today, the retailer's February 37 put has traded volume of 4,678 contracts, while the 35 strike has seen 4,301 contracts change hands. read more...
Defense industry publication Inside Defense on Tuesday said that truck maker Navistar International Corporation (NAV: sentiment, chart, options) could receive a hefty order from the U.S. military for the first time in more than a year. More specifically, the firm is expected to receive orders for at least 1,050 mine-resistant armored trucks, the publication's Web site reported, though representatives from both Navistar and the Pentagon didn't comment. read more...
Internet issue and Street freshman AOL, Inc. (AOL: sentiment, chart, options) is expected to report its fourth-quarter figures before the opening bell tomorrow, according to Thomson Reuters. Ahead of the event, one AOL shareholder is apparently attempting to protect profits by implementing a collar on the stock. read more...
Call speculators have swarmed Marvell Technology Group Ltd. (MRVL: sentiment, chart, options) today, after analysts at Broadpoint Amtech upgraded their view on the semiconductor sector to "overweight" from "neutral weight." In afternoon trading, the security has seen roughly 13,000 calls cross the tape – about 3.5 times its expected single-session volume of fewer than 3,700 calls. read more...
E-Trade Financial Corporation (ETFC: sentiment, chart, options) was a favorite target in the options pits on Friday, after the company revealed its fourth-quarter figures. However, while most bearish traders were employing puts to bet on an extended slide for the shares, some pessimistic option players took the road less traveled by selling long-term calls on the online brokerage behemoth. read more...
Gold prices have plunged nearly 7% since peaking above $1,160 an ounce in mid-January. The malleable metal is now trading just above $1,075 to $1,080 an ounce, an area that has provided a floor for gold prices since November 2009. Given today's options activity on the SPDR Gold Trust (GLD: sentiment, chart, options) exchange-traded fund (ETF), it appears that at least one options trader is betting that the precious metal will rebound from this support level. read more...
Today's Most Popular Stories
working... 
