Bullish bettors took a shine to General Electric Company
(NYSE:GE) yesterday, as roughly 48,000 calls crossed the tape during the course of the session. This was a 54% mark-up over the norm, and almost triple the number of puts exchanged. Also of note, the stock's 30-day, at-the-money implied volatility was docked at 18.1% by Tuesday's close, compared to a reading of 15.6% on August 20.
The weekly 9/6 23.50-strike call was the option du jour, as 15,527 contracts switched hands here for an volume-weighted average price (VWAP) of $0.05. The bulk of these calls traded at the ask price, suggesting they were bought. Meanwhile, open interest surged by 12,450 contracts overnight, confirming the initiation of new positions.
In order for speculators to profit from their bought-to-open calls, GE must power north of breakeven at $23.55 (strike price plus the VWAP) by this Friday's closing bell, when these weekly options expire. This represents expected upside of about 1.9% to the stock's present perch at $23.11. At last check, the delta for this option stood at 0.19, implying it has nearly a 1-in-5 chance of finishing in the money by week's end.
Still, even if GE remains south of the strike price throughout the call's lifetime, the most yesterday's bulls risk forfeiting is the initial cash outlay. What's more, even after the recent pop in 30-day implied volatility, the security's Schaeffer's Volatility Index (SVI) of 18% ranks lower than all but 32% of similar readings taken during the past year, indicating the stock's near-term options are relatively inexpensive right now.
General Electric Company has struggled on the charts lately, having shed 7.4% since touching an earnings-induced, multi-year high of $24.95 on July 19. Additionally, the shares continue to trade below their descending 10-day moving average, which has acted as resistance since early August. However, the equity's Relative Strength Index (RSI) of 29 sits near oversold territory, suggesting a reversal could be in the cards for the diversified industrial concern.
This article by Terri Stridsberg was originally published on Schaeffer's Investment Research.
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