Unusual Option Activity: General Electric (GE)

Industrial conglomerate General Electric (GE) has been on a tear, with shares doubling over the past year. One trader sees further gains ahead.

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  • That’s based on the June $160 calls. With 74 days until expiration, 23,168 contracts traded compared to a prior open interest of 104, for a massive 223-fold rise in volume on the trade. The buyer of the calls paid $3.80 to make the bullish bet.

    GE shares recently traded for about $147, so the stock would need to rise by $13, or about 8.8%, for the option to move in-the-money. Shares are already at a 52-week high, and trending higher.

    Operationally, performance has been a bit more mixed. Earnings are off by 27% over the last year, although revenues did rise by 15%. The market is also pricing in the company’s plan to spin off various divisions.

    Action to take: With the spinoff plan underway, investors may see some valuation opportunity buying GE now ahead of the split. That will result in owning three separate businesses in the coming months.

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  • Investing for the spinoff is speculative, as the share prices of the companies may diverge after they’re spun off.

    For traders, the June $160 calls play to the current uptrend in shares. The option can likely see further mid-double-digit returns. But traders may want to take profits quickly ahead of the spinoff.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.

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