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Option Brief: General Electric Company (NYSE:GE) has been moving higher since hitting a year-to-date low of $24.32 in early February -- thanks to a handful of bounces off its 200-day moving average -- with the shares up about 9% to trade at $26.47. Option players have been taking notice of this steady rise, and in yesterday's session, calls outpaced puts by a more than 2-to-1 margin. Diving deeper, a number of speculators bet on GE to reclaim its perch atop the $28 mark, an area not traversed since the very last trading day of 2013.
The most active GE option on Wednesday was the weekly 7/11 28-strike call, where all of the 3,200 contracts that traded did so at the ask price, suggesting they were bought. What's more, implied volatility edged higher, and open interest rose the most of any strike overnight, making it safe to assume a fresh batch of bullish bets was initiated.
Based on the volume-weighted average price (VWAP) of $0.05, the traders will profit if GE is sitting north of $28.05 (strike plus VWAP) at the close on Friday, July 11 -- when the weekly options expire -- with profit rising with each additional step the stock settles above here. This breakeven mark is just 4 pennies shy of the equity's five-year high of $28.09, which was tagged on Dec. 31. Should the stock close south of the strike price at expiration, the most the speculators stand to lose is the initial premium paid.
Now appears to be an opportune time to scoop up GE's short-term options at a bargain, though. In fact, the stock's Schaeffer's Volatility Index (SVI) of 14% ranks lower than 90% of similar readings taken in the past year, meaning premium on the equity's near-term options is relatively affordable at the moment.
On the fundamental front, General Electric Company (NYSE:GE) announced yesterday it has entered into an agreement with Angola to supply the South African nation with roughly $1 billion of railway and energy equipment. Meanwhile, all eyes will be on the diversified conglomerate over the next week or so, with Siemens due to give its counter-bid for Alstom's energy division by Monday, June 16.