Pre-Earnings GE Options Traders Downplay Double-Barreled Support

General Electric stock could take a bounce off its 50-day moving average

by Alex Eppstein |

Published on Apr 20, 2017 at 2:26 PM
Updated on Apr 20, 2017 at 2:26 PM

Fresh off the completed acquisition of LM Wind Power, General Electric Company (NYSE:GE) stock is climbing. At last check, shares of the industrial conglomerate had muscled 1.6% higher to trade at $30.48, ahead of tomorrow morning's earnings report. While GE's post-earnings price action leaves much to be desired, one technical indicator suggests the shares could be close to a breakout.

Starting with earnings, GE stock has finished lower in the session subsequent to the past five reports. That said, the shares have averaged a pretty modest 1.2% loss over that time frame, so a sharp bear gap would be highly unusual.

In fact, if GE does retreat after earnings, it could find a foothold at its 50-day moving average. The stock recently crossed over this trendline, which has been one of the best "buy" signals over the past 12 months. Not to mention, the 50-day is roughly in line with the round-number $30 level, suggesting GE could benefit from a double-barreled layer of support.

Today's options traders don't necessarily see things this way. GE puts are trading at double the rate of calls, and seven times their usual intraday pace. What's more, put volume is on track to finish in the 99th percentile of its annual range. The April 29 strike is GE's most active option by a mile, with almost 45,700 contracts on the tape. If options traders are buying fresh positions here -- as the data seems to indicate -- the goal is for the stock to breach $29 by tomorrow's close, when front-month options expire.

Today's extreme put preference represents a break from the historical trend. General Electric Company (NYSE:GE) sports a Schaeffer's put/call open interest ratio (SOIR) of 0.47, indicating calls double puts within the front three-months' series. Not to mention, GE's SOIR ranks in the bottom quartile of its annual range, suggesting short-term traders are more call-skewed than usual.
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