Options Traders Pile On Struggling GE Stock

GE is the worst Dow stock so far today

Managing Editor
Apr 3, 2018 at 2:31 PM
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General Electric Company (NYSE:GE) is the worst Dow stock today, down 0.8% to trade at $13.01, after Stifel issued a price-target cut to $13 from $15. Against this backdrop, options traders are piling on GE -- with some likely betting on even bigger losses for the blue chip.

Taking a closer look, roughly 126,000 GE options have changed hands today, with calls and puts running neck and neck. The May 13 put is the most popular, with nearly 17,000 contracts exchanged and buy-to-open activity detected. This suggests options traders are banking on the Dow stock to keep falling through the close on Friday, May 18 -- when the options expire -- a time frame that includes the company's April 20 earnings report.

With earnings due out the morning of front-month options expiration, those buying premium at the May strike may be looking to take advantage of lower implied volatilities At last check, GE's 30-day at-the-money implied volatility is docked at 45.8%, versus May implied volatilities of roughly 39.9%.

Regardless, GE shares have consistently rewarded premium buyers over the past year. The stock's Schaeffer's Volatility Scorecard (SVS) of 90 indicates General Electric has tended to make outsized moves over the last 12 months, relative to what the options market has priced in.

Looking closer at the charts, General Electric stock skidded to an eight-year low of $12.73 on March 26. However, a short-lived bounce from here -- even with a boost from Warren Buffett -- was quickly halted by its 10-day moving average. Plus, the shares are down 25% in 2018.

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