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Most Active Options Update: General Electric Company (GE)

GE option traders use December calls to bet on short-term upside

by 12/2/2013 2:50 PM
Stocks quoted in this article:

The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Three names of notable interest this afternoon are General Electric Company (NYSE:GE), Microsoft Corporation (NASDAQ:MSFT), and Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR).

Microsoft Corporation hit a new 13-year high today, after the company's $7.2-billion bid for Nokia Corporation's (ADR) (NYSE:NOK) mobile division was approved by the Department of Justice. However, one skeptic appears to have initiated a bearishly skewed put spread using December options. Elsewhere, Petroleo Brasileiro Petrobras SA (ADR) was down roughly 12% at last check, amid reports that the government-run, Brazil-based company would begin tapering fuel subsidies. Amid this slide, the stock was placed on the short-sale restricted list, sending put volume to nearly three times its average intraday level, as traders look for alternate ways to bet bearishly on PBR. Meanwhile, here's a closer look at where General Electric Company speculators are placing their near-term hopes, and how much they're willing to pay for the bullish bets.


Despite a price-target hike at Barclay's this morning, General Electric Company is sticking close to the flat line this afternoon. The muted price action hasn't stopped option players from betting on a quick move north over the next several weeks. Of the roughly 53,000 calls that have crossed the tape today, 18,340 contracts have changed hands at the December 27 call. While a block of 5,000 contracts appear to be involved in a larger call spread, a healthy portion of the activity has occurred on the ask side and is independent from activity at other strikes. Implied volatility at the out-of-the-money strike has ticked 1.6 percentage points higher, and data from the International Securities Exchange (ISE) confirms that a number of positions have been bought to open.

With the stock lingering near $26.68, the expectation is for GE to muscle above the $27 mark ahead of the close on Friday, Dec. 20. The options market isn't too confident the call will be in the money at expiration, as delta is docked at 0.37, or 37%. Should General Electric fail to topple the strike price during the course of its lifetime, the most the traders have on the line is the initial premium paid. According to Trade-Alert, the volume-weighted average price for the calls is $0.21 apiece.

This is a relatively modest amount, per the stock's Schaeffer's Volatility Index (SVI) of 16%, which ranks lower than 82% of similar readings taken in the past year. Simply stated, premium on General Electric Company's (NYSE:GE) short-term options is inexpensive at the moment, from a volatility perspective.


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