General Electric Company (GE) Bears Take Aim at a Critical Level

General Electric Company has spent the year on both sides of the $26 mark

by Karee Venema

Published on Dec 4, 2014 at 11:17 AM
Updated on Apr 20, 2015 at 5:32 PM

General Electric Company (NYSE:GE) is testing its mettle atop $26 today -- an area that has served as both support and resistance throughout 2014 -- with the shares last seen 1.5% lower at $25.99. Against this backdrop, today's option traders are rolling the dice on a steeper retreat from this historic level over the next week.

Taking a quick step back, puts are trading at five times what's typically seen at this point in the day, due largely to the action happening at the weekly 12/12 26 strike. Roughly 11,600 contracts have changed hands here -- accounting for 35% of the intraday put volume -- and it looks like new bearish positions are being opened. This theory is confirmed by data from the International Securities Exchange (ISE).

Based on GE's present perch, these puts are right at the money. However, in order for today's put buyers to profit, the stock must be sitting south of breakeven at $25.83 (strike less the volume-weighted average price of $0.17) at next Friday's close, when the weekly series expires. Gains will accumulate below here, while losses are limited to the initial premium paid, should GE settle north of the strike at expiration.

From a wider sentiment perspective, today's accelerated put activity is just business as usual in General Electric Company's (NYSE:GE) options pits. At the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 0.74 ranks at an annual bearish peak.

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