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General Electric Company (GE) Bulls Bet Against a Move Lower

Short-term put writers expect General Electric Company to remain above $23

by 2/3/2014 10:11 AM
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Option Brief: Call traders outpaced put traders in General Electric Company's (NYSE:GE) options pits last Friday. However, the most active non-expiring contract was the March 23 put, where nearly 6,000 contracts -- including a block of 2,252 -- were exchanged.

Over three-quarters of the volume at the aforementioned strike occurred at the bid price, implying the out-of-the-money GE puts were sold. Open interest at the strike also added nearly 4,900 positions over the weekend, making it safe to assume the contracts were newly minted. In other words, these put traders didn't place typical, bearish buy-to-open bets, but rather, neutral-to-bullish sell-to-open bets.

To further clarify, Friday's put writers are hoping General Electric -- which is currently pennies off of breakeven at $25.11 -- will remain perched above the strike price through the closing bell on March 21, when the back-month options expire. If the stock complies, then the options will expire worthless, and the sellers will retain 100% of the premium received as their maximum potential reward. On the other hand, if GE dives below $23 -- which last occurred on an intraday basis in early September -- the traders could be assigned, and forced to purchase the shares for $23 apiece, no matter how low they're trading at the time.

On the fundamental front, General Electric Company (NYSE:GE) has been busy. Last Friday, The European Commission granted the diversified tech and financial firm regulatory approval to purchase three business units from Thermo Fisher Scientific Inc. (NYSE:TMO). Also, earlier this morning, GE announced the launch of its Downstream Technology Solutions (DTS) division.


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