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Option Brief: General Electric Company (NYSE:GE) option volume is running at an 18% mark-up to the intraday average this afternoon, and calls are the contracts of choice -- outpacing puts by a more than 2-to-1 margin. Meanwhile, although nine of the 10 most active strikes expire within the next three months, the equity's 30-day at-the-money implied volatility (IV) is down 2.7% to 11.9%, after earlier falling to its lowest perch in a year.
Roughly one-third of the day's overall options volume has centered on GE's June 27 call, where 21,129 contracts have changed hands. The lion's share of this action occurred when a massive block of 16,450 contracts crossed the tape shortly before noon at the ask price of $0.41, hinting at buyer-driven activity. Plus, IV rose 1.2 percentage points at the transaction, signaling the initiation of new positions. This theory is echoed by data from Trade-Alert.
Although the $27 area briefly served as support for GE in November 2013 and January of this year, the equity has not traded north of here since Jan. 16. As such, delta for the call is docked at 0.40, suggesting a slim 40% chance the option will be in the money at the close on Friday, June 20, when the options expire. Should the equity fail to topple the strike price, the most the block trader stands to lose is the initial cash outlay, or $674,450 (16,450 contracts * premium paid * 100 shares per contract).
However, today's call buyer isn't the only one who's had her eye on GE's $27 mark. In fact, this strike contains peak call open interest in the May series, where 38,744 contracts currently reside. In the near term, this level could continue to resist GE's advances, as the hedges related to these bets unwind ahead of the May 16 expiration date.
On the fundamental front, the dance between Siemens AG (ADR) (NYSE:SI), Alstom, and General Electric Company (NYSE:GE) continues. While Alstom has said it's intrigued by GE's roughly $17 billion bid, it is giving Siemens until the end of May to top the offer.