Time to Buy Calls on General Electric Stock

GE options are affordably priced at the moment

Aug 16, 2023 at 2:25 PM
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Subscribers to Schaeffer's Weekend Trader options recommendation service received this GE commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

The shares of General Electric Co (NYSE:GE) suffered a post-earnings pullback to their 30-day moving average last week, the same area that offered strong entry points throughout 2023. Despite this pullback the stock is still trading above its pre-earnings close. What’s more, implied volatility (IV) is back in line with GE’s historical volatility (HV). In June and July, IV was above HV, making now a more attractive time for options buyers to play the trend relative to the last few months.

WT Repost GE

Leading up to the late-July earnings report, options buyers were more pessimistic than they had been in the past three months. At-the-money IV is now lower than 98% of readings from the past year, according to TradeAlert. Plus, the positive earnings move pushed General Electric stock above its 10-year moving average at $110 -- a mark where the shares paused for more than three weeks before earnings.

From October 2022 through May 2023, the equity regularly appeared on a major brokerage’s “net sold during the month” monthly report. Even still, amid its 75% year-to-date lead and 86% year-over-year return, only 13 of 21 analysts rate GE a “buy” or better, and the only brokerage action since late April was a downgrade. This leaves plenty of room for pessimism to unwind and add tailwinds.

Our recommended December call has a leverage ratio of 7.1 and will double on a 14.9% pop in the underlying stock.

 

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