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Put Buyers, Sellers Gamble On General Electric Company (GE)

Long-term traders bought and sold General Electric Company puts yesterday

by 5/9/2014 10:09 AM
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Long-term put traders could be found in General Electric Company's (NYSE:GE) options pits yesterday. While the most active strike was the back-month June 27 call, these positions were mostly bought to close. On the other hand, opening activity took place at the diversified tech and finance firm's January 2015 24-strike put and December 25 put.

The 5,000-plus contracts traded at the out-of-the-money (OOTM) LEAPS strike were mostly of the buy-to-open sort, as the majority crossed at the ask price and nearly all of the volume translated as open interest overnight. In short, these put buyers expect GE -- currently perched at $26.49 -- to drop at least 9.4% over the coming months in order to bring the option into the money by January 2015 options expiration. Their risk, meanwhile, is capped at the initial premium paid.

The volume and open interest translation were very similar at GE's OOTM December 25 put. However, 87% of the 5,046 contracts traded here did so at the bid price, suggesting they were sold. By writing the puts to open, the traders took a neutral-to-bullish approach to the stock, expecting it to remain above $25 throughout the option's lifetime. However, the potential risk is greater on these short puts (relative to the long puts), as losses will accumulate with each step the shares take south of the strike.

From a wider perspective, put selling has been far more popular than put buying in recent sessions. During the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), roughly 26,500 General Electric Company (NYSE:GE) puts have been sold to open, versus fewer than 9,000 bought to open.


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