General Electric Options (GE): Unusual Trading Activity

| August 2, 2012 | 0 Comments

GE OptionsOptions in General Electric (GE) lit up our tracking system this morning with a large amount of unusual trading activity.

Obviously, the market is showing tremendous weakness this morning.  And GE is no exception.  The bluest of blue chip stocks is trading down 1.3% at $20.46. 

What’s important to note is that GE’s clearly underperforming its peers in the Dow.  And as you might expect, option traders are jumping all over the situation. 

Right out of the gate, option traders began loading up on GE puts.  The bulk of the activity seems to be centered around the GE August $20 strike. 

Nearly 7,000 of these contracts have already traded at an average price of $0.15 in just the first few minutes of the trading session. 

Remember, option traders buy puts when they believe the underlying stock is going to decline in value.  And when they buy them without any other options as these traders did, the profit potential is unlimited.

Personally, I’m in favor of this trade… it’s an inexpensive play on GE declining in value.

But why bet against mega-cap General Electric?

As you know, GE is one of the world’s leading technology and financial services companies. 

The company’s Energy Infrastructure segment offers wind turbines, gas and steam turbines and generators, as well as integrated gasification combined cycle systems.  They also provide aircraft engine parts, nuclear reactors, and advanced semiconductor solutions.

I think the large put buying on GE is due to the company’s recent decision to bring jobs back to America.

The decision involves a ton of risk.  In fact, CEO Jeff Immelt recently said the decision to put $1 billion into the group’s domestic appliances business in order to bring jobs back home is “as risky an investment as we have ever made”.

I think that pretty much says it all.

If this decision fails, it could end up being very costly for GE in the near-term.  And that would be bad news for the stock.

For more detailed information on unusual options activity and how you can profit from it, be sure to sign-up for our daily newsletter, Options Trading Research.  It’s always 100% free and packed full of option trading ideas you can use immediately in your own portfolio.  Click here to subscribe for free.

Safe Trading,

Marcus Haber

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Category: Unusual Options Trading Activity

About the Author ()

Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.