GE Calls Hot Ahead of Earnings

General Electric will report earnings before the open tomorrow

Managing Editor
Jan 28, 2020 at 11:34 AM
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Lost in the panic over the spreading coronavirus, there's a full slate of earnings for investors to unpack this week. One notable name on deck is former blue chip General Electric Company (NYSE:GE), which is set to report fourth-quarter earnings before the open tomorrow, Jan. 29. Ahead of the event, we broke down recent options activity surrounding GE. 

For some time now, GE calls have reigned supreme. More specifically, 2.69 calls have been bought to open for every put on the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) during the last 50 days. What's more, this ratio is 2 percentage points from an annual high, suggesting this heavy preference for calls is unusual.

Shifting gears to today, the March 13 call leads the way by a comfortable margin, with nearly 16,000 contracts traded here. The weekly 1/31 12.50-strike call is also popular, with sell-to-open activity detected. Those selling the weekly GE calls are either betting on the $12.50 level to serve as a ceiling through week's end, or are hoping to profit on a post-earnings volatility crush.

Digging into General Electric's earnings history, the stock has closed higher the day after earnings in four of the past eight quarters, including an 11.5% pop back in October. During this time frame, GE stock has averaged a 6% post-earnings swing, regardless of direction. This time around, the options market is pricing in a larger-than-usual 10% move for tomorrow's trading.

On the charts, GE is up 1.6% to trade at $11.67, but in the past week, the shares have pulled back amid the coronavirus-fueled broad-market sell-off. However, the drop appears to have been contained by the shares' 50-day moving average, a trendline that caught a pullback to start 2020, and has only been breached on a closing basis once since October. 

Daily Stock Chart GE

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