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General Electric Option Traders Target Short-Term Upside

GE's 12/14 22-strike call was popular among short-term traders on Wednesday

by 12/13/2012 9:29 AM
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Option players have been increasing their bullish presence on General Electric Company (NYSE:GE - 21.78) with a fervor of late, as indicated by data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Over the course of the past 10 sessions, traders have bought to open nearly five calls for every put on GE. What's more, this call/put volume ratio of 4.70 ranks just eight percentage points from a 52-week peak, suggesting bullish bets have been scooped up over bearish at a near annual-high clip.

GE calls were flying off the shelves on Wednesday. Roughly 89,000 contracts crossed the tape, more than doubling the average daily volume for call options. By comparison, around 45,000 put contracts traded. Short-term speculators turned their attention to the stock's weekly series of options -- specifically, GE's 12/14 22-strike call. Of the 3,114 contracts traded, 82% changed hands at the ask price and open interest rose overnight, hinting at buy-to-open activity.

By initiating these near-the-money calls, traders will profit with each step north of $22.08 (the strike price plus the volume-weighted average price [VWAP] of $0.08) GE takes through week's end, at which point these options will expire. This breakeven mark represents a slim 1.4% premium to current levels.

This rush toward bullish bets isn't surprising, given the stock has advanced more than 31% on a year-over-year basis. This solid price action has been highlighted by GE's 50-week moving average, which has provided a solid layer of support throughout the past 12 months.

Should GE fail to muscle above $22.08 by Friday's close, though, the most yesterday's weekly call buyers stand to lose is the initial net debit paid.


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