Put Players Cash In On General Electric Company's (GE) Post-Earnings Slump

General Electric Company (NYSE:GE) is sliding down the charts after earnings

Kirra Fedyszyn
Jul 22, 2016 at 11:38 AM
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Despite the blue chip reporting better-than-forecast earnings and revenue this morning, Dow stock General Electric Company (NYSE:GE) is trading 2.1% lower at $31.92, as industrial orders for the quarter failed to impress. In fact, GE is currently the worst performer for the day on the index. While shareholders may be disappointed, some recent option bears are cashing in on their winning bets.

Jumping right in, GE puts are crossing the tape at almost three times their expected daily rate, with much of the action happening at the August 33 and weekly 7/29 32.50 strikes, where traders are selling to close their positions. Digging deeper, a number of the August puts were bought to open on Monday, for volume-weighted average price (VWAP) of $0.68. Even with today's post-earnings volatility crush, which has the stock's 30-day at-the-money implied volatility down nearly 15% at 13% -- in the bottom percentile of its annual range -- these put buyers are selling to close their positions for an average of $1.11 apiece, hinting at monster gains.

Bearish sentiment toward GE has been growing lately, both in and outside of the options pits. Across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have been purchasing fresh puts over calls at an accelerated rate, per the stock's 50-day put/call volume ratio of 1.50 -- higher than 90% of all readings in the past 12 months.

Meanwhile, short interest on GE spiked 77% over the two most recent reporting periods. Still, these bearish bets represent a relatively low 2.1% of the equity's total float. Analysts haven't been showing the stock much love, either, with more than half of the brokerage firms followings GE rating the shares a "hold" or "strong sell." And the consensus 12-month price target of $33.36 sits just 4.5% overhead.

Today's slump aside, GE hasn't done much to deserve such lackluster sentiment. In fact, the stock rallied to an eight-year high of $33.00 on Wednesday, after bouncing from its 40-week moving average. Plus, General Electric Company (NYSE:GE) has added nearly 22% year-over-year.

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