Analyst: Steer Clear of This Dow Stock

Options traders have been increasingly call-heavy on GE

by Emma Duncan

Published on Apr 11, 2018 at 10:25 AM
Updated on Jun 24, 2020 at 10:16 AM

Cowen and Company cut its price target on General Electric Company (NYSE:GE) to $12 from $15, and said it expects the industrial manufacturer to report a first-quarter earnings miss next Thursday morning, and that its upcoming financial restatements for 2016 and 2017 will pressure the "show me" stock. What's more, the brokerage firm said GE's dividend is at risk unless cash flow improves. After falling nearly 1.5% out of the gate, the equity was last seen fractionally lower at $13.05.

More broadly, it's been a steady path lower for the Dow stock, which currently sits 57% below its its annual high of $30.54 from last April 20. Ushering the shares lower have been double-barreled resistance from their 40- and 60-day moving averages. The stock hasn't closed above this pair of trendlines since mid-January.

Options traders have ramping up their bullish exposure in recent weeks on GE. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows General Electric stock with a 10-day call/put volume ratio of 2.66, ranking in the 77th percentile of its annual range. This suggests that calls have been purchased over puts at a faster-than-usual clip during the past two weeks.

The Dow name also sports a Schaeffer's put/call open interest ratio (SOIR) of 0.61, which ranks in the low 15th percentile of its annual range. This indicates that near-term traders have rarely shown a greater preference for calls over puts in the last year, with peak front-month open interest of 126,198 contracts currently docked at the April 15 strike.


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