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Venerable blue chip General Electric Company (NYSE:GE) has piqued the interest of option speculators today, who are paying a premium to place pre-earnings bullish bets. Already today, 33,000 GE calls have traded, nearly doubling average intraday call volume and handily exceeding the 15,000 puts on the tape.
Most active by a sizable margin is the November 26 call, where all of the 15,000-plus contracts trading have done so at the ask price. Shortly after the open, a number of large block trades were executed in rapid succession across five options exchanges. Rising implied volatility and information from Trade-Alert suggests the bulk of these options are being purchased to open for a volume-weighted average price (VWAP) of $0.11.
In order for the long calls to be profitable at expiration in six weeks or so, GE will need to gain 8.3% from its current price of $24.11 to topple $26.11 (the strike price plus the VWAP). It's worth noting that this is above the stock's 12-month high of $24.95. In fact, GE has not traded above the $26 level since September 2008. As such, the option's delta of 0.15 indicates a slightly better than 1-in-7 chance the call will be in the money once expiration rolls around.
As noted, implied volatility has ticked 1.8 percentage points higher today at the November 26 call to 19.5%. This compares to GE's two-month historical, or realized, volatility of 13.9%. In short, these back-month options are elevated in price, historically speaking.
GE has a fairly steady track record in the earnings confessional, exceeding estimates in six of the last eight quarters (and matching twice). Post-earnings price action hasn't been terribly dramatic; the stock has gained an average of 0.02% the day following its earnings report, and added 1.1% (on average) over the ensuing week. When the company last reported quarterly earnings on July 19, however, the shares spiked 4.6% the subsequent day, after edging out estimates by a penny per share.
General Electric Company (NYSE:GE) is scheduled to disclose its third-quarter earnings ahead of the open on Friday, Oct. 18. Analysts are currently expecting a per-share profit of 37 cents, or a penny better than last year's results.
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