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Option Brief: General Electric Company (NYSE:GE) saw an uptick in call activity on Friday, with the contracts trading at a 48% mark-up to the average daily volume. By far, the most popular strike was GE's June 27 call, where 30,454 contracts switched hands. As a point of comparison, the next most active strike was the now-expired May 26 call, which had 7,366 contracts on the tape by session's end.
Diving deeper reveals that the majority of the action at GE's June 27 call occurred when a massive block of 20,000 contracts crossed in the second half of the session. This lot changed hands at an ask price of $0.26, and open interest surged over the weekend, pointing to the purchase of new long positions.
On Friday, delta on the call was docked at 0.34, suggesting a roughly 1-in-3 chance the option will expire in the money at the close on Friday, June 20. Should the stock fail to rise more than 1.2% from its current price at $26.67 to topple the strike, the most the trader stands to lose is the initial cash outlay, or $520,000 (20K contracts * $0.26 premium paid * 100 shares per contract). However, with GE's Schaeffer's Volatility Index (SVI) of 14% ranked at the low end of its annual range, this speculator scooped up these front-month calls at a relative bargain.
Meanwhile, amid the flurry of M&A headlines hitting the Street, General Electric Company (NYSE:GE) is reportedly exploring French companies -- including Areva SA -- about potential asset sales or partnerships in hopes of gaining an edge in its bid for Alstom SA. Along similar lines, German-based Siemens AG is rumored to be readying its formal offer for Alstom this week.