GE Stock Options Hot After Upgrade, IPO News

Several GE options traders are targeting a short-term ceiling for the stock

by Karee Venema

Published on Dec 19, 2018 at 2:04 PM

The shares of General Electric Company (NYSE:GE) are trading up 7.1% today at $7.79, after Bloomberg reported the company has filed confidentially for an initial public offering (IPO) of its healthcare unit. Plus, GE stock was upgraded for the second time in the past week -- with Vertical Research Partners lifting its rating to "buy" -- which is only stoking the bullish flames, and has the equity on track for its highest close in nearly a month.

Against this backdrop, GE options are flying off the shelves, with most of the action occurring on the call side. At last check, roughly 232,000 calls and 120,000 puts were on the tape, about 1.5 times what's typically seen at this point.

However, it looks like some traders don't expect GE stock to extend today's positive momentum through year's end. The weekly 12/28 8-strike call is most active, with 34,067 contracts traded so far, though the bulk of the action appears to be of the sell-to-open kind. In other words, call writers expect $8 to serve as a ceiling through expiration at the close next Friday, Dec. 28.

More broadly speaking, options traders have been buying to open puts relative to calls at a quicker-than-usual clip in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), General Electric's 10-day put/call volume ratio of 0.58 ranks in the 73rd annual percentile.

The skepticism has been ramping up elsewhere in Wall Street, too, with short interest up 36.4% since early September. But while the 135.07 million shares are the most since the June 15 reporting period, they account for a low 1.6% of GE stock's float.

On the charts, General Electric stock has surrendered 55.6% so far in 2018. The security is currently pacing for a 31% fourth-quarter loss -- which would mark its worst since the stock market bottom in the first quarter of 2009 -- and hit a nine-year low of $6.66 on Dec. 11. Plus, today's rally is running out of steam just below $8, a region that's contained the stock since late November.

general electric daily stock chart dec 19

 
 

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