Options Volume Explodes as GE Stock Plunges

A moderately bullish options trader appears to be throwing in the towel on GE

Nov 13, 2017 at 11:36 AM
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General Electric Company (NYSE:GE) stock is selling off after the company said it will halve its dividend payment, reduce its seats on the board by six to 12, and narrow its focus to the power, healthcare, and aviation divisions. General Electric also lowered its fiscal 2018 earnings target. With GE shares down 3.9% at $19.69, options traders are blasting the Dow stock -- and it looks like one cautiously optimistic speculator is throwing in the towel.

At last check, 249,282 calls and 167,593 puts have changed hands on GE, more than three times what's typically seen at this point in the day, and volume pacing in the 100th annual percentile. Most active are the November and December 22 calls, due to symmetrical 55,000-contract blocks that crossed earlier. It's possible that this is due to one trader closing out their long call calendar spread that was originally initiated on Nov. 2, when the stock was trading near $19.84.

Heading into today's trading, sentiment was mostly optimistic. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), options traders had bought to open 1.22 calls for each put in the past month.

Plus, short interest accounts for a low 1.38% of the equity's available float. Analysts, meanwhile, still maintain six "buy" or better ratings versus seven "hold" or "strong sell" recommendations, and the average 12-month price target of $24.87 stands at a 27.2% premium to GE's current perch.

This suggests there's plenty of optimism being priced into GE shares -- and leaves the stock vulnerable to bigger losses on a bearish unwind. Already, though, General Electric is down 38.3% year-to-date -- making the worst Dow stock of 2017 so far -- and hit a two-year low of $19.41 this morning. And after the security recently logged its biggest losing streak in 40 years, CNBC pundit Jim Cramer earlier said, "GE is one of the biggest mistakes of my career."

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