The $2 Million Bearish Bet On General Electric Company (GE)

General Electric Company (NYSE:GE) September options were used to initiate a massive long put spread

Mar 17, 2016 at 2:27 PM
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General Electric Company (NYSE:GE) is flying high today -- along with several of its fellow Dow stocks -- amid a broader blue-chip rally.  Nevertheless, put volume has surged to four times the expected intraday rate, with one speculator, in particular, betting big on headwinds for the shares of GE over the next several months.

Diving deeper, two matching blocks of 30,000 contracts simultaneously crossed the tape at GE's September 25 and 29 puts. According to Trade-Alert, this is most likely the result of one option trader initiating a long put spread -- perhaps by rolling out her bearish front-month position -- for roughly $1.9 million. In other words, she expects GE to trend lower through September options expiration.

More broadly speaking, today's accelerated put volume just echoes the withstanding trend. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), GE's 10-day put/call volume ratio of 2.24 sits just 4 percentage points from a 52-week peak.

Meanwhile, for those purchasing GE's near-term options, now appears to be an opportune time to strike. Not only does the equity's Schaeffer's Volatility Index (SVI) of 15% rank in the 8th annual percentile, but its 30-day at-the-money implied volatility of 14.9% sits below 87% of all comparable readings. In other words, premium on GE's short-term options is pricing in relatively low volatility expectations at the moment.

On the charts, General Electric Company (NYSE:GE) has surged 14.7% since hitting a Feb. 11 year-to-date low of $27.10. What's more, with the shares up 3% this afternoon to trade at $31.09, they are within striking distance of their Dec. 31 seven-year high of $31.49.

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