GE Put Volume Jumps After CEO Shocker

GE option bears are buying to open weekly puts

Mar 6, 2019 at 1:13 PM
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The shares of General Electric Company (NYSE:GE) have taken a beating this week, after CEO Larry Culp yesterday warned on this year's cash flow. As such, J.P. Morgan Securities analyst Stephen Tusa said his $6 price target on GE stock "looks generous," and CNBC's "Mad Money" host Jim Cramer compared the comments to dropping "a bomb on my head." Against this backdrop, GE shares are down another 7.4% to trade at $9.15, and put options are flying off the shelves.

GE dropped more than 4% on Tuesday, and considering today's plunge, is pacing for its worst week since early November, down more than 10%. The security is now on pace to end a second straight day beneath its 20-day moving average -- a trendline that propelled the industrial conglomerate's shares 76% higher from their Dec. 11 bottom of $6.40 to their Feb. 25 high of $11.29. The $11-$11.50 region, in fact, acted as a layer of support for the stock late last year, but could switch roles to serve as resistance.

GE stock chart march 6

As alluded to earlier, General Electric options are more active than usual today, especially on the put side of the aisle. So far, GE has seen roughly 376,000 puts and 205,000 calls change hands -- two times the average intraday amount.

Most active by a mile is the weekly 3/8 8.50-strike put, which has seen close to 65,000 contracts cross the tape. A healthy portion of the activity appears attributable to new buyers, who expect GE stock to breach the $8.50 level by the close on Friday, when the weekly options expire.

Today's appetite for short-term puts is just more of the same, though. GE's Schaeffer's put/call open interest ratio (SOIR) stands at 7.08, indicating that put open interest exceeds call open interest by a margin of more than 7-to-1, considering options expiring within three months. What's more, this ratio is in the 99th percentile of its annual range, suggesting short-term options traders have rarely been more put-biased in the past year.
 

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