Stocks quoted in this article:
Option bulls set their sights on General Electric Company (NYSE:GE) once again yesterday, as roughly 65,000 calls were exchanged during the course of the session. This was nearly double the equity's average daily call volume, and almost four times the number of puts traded. Taking a closer look at the data, it appears one group of speculators is wagering that the stock will trek higher within the next few months.
To be more specific, north of 28,300 contracts crossed at the December 25 call, which was by far the most active strike of the day. A hefty portion of the volume changed hands in one large block of 25,000 calls for an ask price of $0.37 each, suggesting they were purchased. Meanwhile, open interest surged by 25,748 contracts overnight, confirming the addition of new long positions.
By purchasing the calls to open, the trader is expecting GE to ascend past the breakeven rail of $25.37 (strike price plus the net debit) by December expiration. This denotes a premium of 5.7% to the stock's current price at $24.01, as well as territory not conquered since October 2008. The delta for this option stands at 0.30, implying it has a nearly 1-in-3 chance of moving into the money ahead of the close on Dec. 20. Still, should the shares remain south of the strike price throughout the option's lifetime -- which encompasses the company's quarterly earnings report on Oct. 18 -- the most Wednesday's bull stands to lose is the initial premium paid.
From a technical perspective, General Electric Company (NYSE:GE) has advanced more than 14% so far this year, underperforming the broader S&P 500 Index (SPX) on a relative-strength basis. Still, the stock's recent pullback was contained by its 40-week moving average, which has served primarily as support since December 2011.
Option Briefs offer a concise look at recent notable trading activity. For more in-depth coverage of securities from an Expectational Analysis®
perspective, please visit our Trading Floor Blog section.