GE Stock Eyes Best Day in Years After CEO Switch

GE is pacing toward its biggest one-day gain since March 2009

Oct 1, 2018 at 9:41 AM
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General Electric Company (NYSE:GE) said it is replacing John Flannery with H. Lawrence Culp -- former head of medical equipment maker Danaher (DHR) -- as CEO of the industrial conglomerate, effective immediately. The company also warned it will miss free cash flow and earnings-per-share (EPS) guidance for this year, and said it will incur a $23 billion impairment charge related to its power business.

In reaction, GE stock is up 15.2% out of the gate at $13.02, on track for its best day since March 10, 2009, when the shares surged 19.7%. More recently, it's been a pretty dismal run for the equity. Heading into today's session, General Electric had shed half its value year-over-year, and just logged its worst monthly loss since last October -- finishing September down 12.8%. Plus, the former Dow stock hit a nine-year low of $11.21 last Wednesday.

In the options pits, short-term options traders have rarely been more biased toward puts over calls as they are now. This is based on GE's Schaeffer's put/call open interest ratio (SOIR) of 1.30, which ranks in the 100th percentile of its annual range.

Drilling down on specific options, the October 11.50 and weekly 11/9 11.50-strike puts saw significant increases in open interest over the past two weeks, with nearly 191,000 contracts added. Data from Trade-Alert points to mostly sell-to-open activity, though the action was likely tied to stock.

Elsewhere, the November 9 and 11 puts were active last Thursday, when matching blocks of 40,000 contracts crossed at each back-month strike. It looks as if one speculator may have initiated a short put spread for an initial net credit of 25 cents per pair of options. If this is the case, the speculator expects GE to hold above $11 through November expiration, but curbed her risk by buying to open the lower-strike put.

 

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