GE Options Bulls Target Key Level After Earnings Beat

General Electric's adjusted profit beat expectations

Oct 30, 2019 at 10:21 AM
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General Electric Company (NYSE:GE) reported an adjusted third-quarter profit of 15 cents per share on $23.36 billion revenue -- more than analysts were expecting. The industrial conglomerate also said it now expects its full-year free cash flow to arrive between flat and $2 billion, up from its previous forecast of minus $1 billion to positive $1 billion.

In reaction, GE stock is up 9.4% at $9.89 -- set to close above its 320-day moving average for the first time since February 2017. Just above here is the $10.00-$10.50 region, though, which has kept a tight lid on General Electric shares for most of the past 12 months, limiting the equity to a 1.6% year-over-year gain.

GE options traders had been positioning for a post-earnings pop. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 2.50 ranks in the 83rd annual percentile, meaning calls have been bought to open over puts at a quicker-than-usual clip.

It's a trend continuing to today's session, with more than 197,000 calls on the tape already -- 16 times what's typically seen at this point, and five times the number of puts traded. The weekly 11/1 10-strike call is most active with 20,000 contracts exchanged, and it looks like new positions are being purchased here for a volume-weighted average price of $0.16. If this is the case, breakeven for the call buyers at this Friday's close is $10.16 (strike plus premium paid).


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