GE Options Volume Surges Ahead of Earnings

The options market expects a much larger-than-usual earnings move for GE stock

by Emma Duncan

Published on Apr 16, 2018 at 11:33 AM

Industrial conglomerate General Electric Company (NYSE:GE) has emerged as one of the worst Dow stocks in history over the past year. With the company's quarterly earnings report due at the end of this week, GE made Schaeffer's Senior Quantitative Analyst Rocky White's list of 20 stocks that saw the heaviest weekly options volume during the past 10 trading days, which can be seen below. (New additions to the list have been highlighted in yellow.)

MAO chart April 16

Large Post-Earnings Move Priced in for GE

Shares of General Electric were down 1.2% at $13.34, at last check, but were still maintaining a newfound presence atop their 20-day moving average. Despite its long-term downtrend, GE joined in last week's broad-market rally, picking up 3.3%. This lift comes just ahead of the company's first-quarter earnings report, due out Friday before the market opens.

GE has finished lower the day after earnings in seven of the last eight quarters, but typically not by a lot -- the stock's average post-earnings daily price move is 1.7% over the last two years. This time around, the options market is pricing in a much larger-than-usual 8.3% next-day move, per Trade-Alert.

That said, General Electric stock has handily rewarded premium buyers over the past year, as the stock currently sports a Schaeffer's Volatility Scorecard (SVS) of 93 out of 100. This means the stock has tended to register bigger price swings than its options premiums have priced in over the past 12 months.

Pessimism Reins Among Options Traders, Analysts

Digging deeper, GE's out-of-the-money May 13 put has seen the largest increase in open interest over the past 10 days, with more than 27,100 contracts added. According to data from the major options exchanges, the bulk of this activity was buyer-initiated, as traders appear to be betting on additional short-term downside.

Echoing recent option activity, analysts are bearishly aligned toward GE ahead of earnings. Of the 12 brokerage firms following the stock, nine carry "hold" or "sell" ratings.

With plenty of pessimism priced into this long-term laggard -- even as the share price shows some signs of life -- it looks as though GE could be poised for a rare upside surprise after this Friday's results hit the Street.

Signal Says Take Profits on This Pharma Stock
The shares are testing a familiar ceiling on the charts
What to Make of the S&P Death Cross
It's the index's first death cross in nearly three years
2 Tech Stocks That Could Fade Into the New Year
Tech stocks have been under heavy scrutiny in recent months
From Schaeffer's Pro Traders
Weekly Options Secrets Revealed

Direct from our Schaeffer's traders, your FREE guide to winning with weekly options!


Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


The Shortcut to Earnings Season Profits
A free tool can help traders bank big this earnings season.
2 Stocks Making Big Moves on Government Buzz
YRC Worldwide is being sued by the DoJ
Goldman Sachs Cools On WBA Stock Ahead of Earnings
The analyst downgraded Walgreens stock to "sell"
This May Be the 21st Century "Oil Boom"
U.S. production of lithium is set to increase 1,300% in the next 2 years.