General Electric Options (GE): Unusual Trading Activity
Options 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.
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Safe Trading,
Marcus Haber
Category: Unusual Options Trading Activity
