Unusual Options Activity: General Electric (GE)

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  • Over 5,300 contracts traded on a January 2023 $4 call option on General Electric (GE). That’s a 19-fold rise in volume against the prior open interest of just 285 contracts.

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  • The option, expiring in 823 days, is over $3 in-the-money, given the current share price at $4. For the option buyer to profit at expiration, shares need to trade at $8 or higher.

    The trade comes as GE continues to struggle, as profits from its aviation division have dried up, leading to a big drop in shares. The company’s work to streamline operations and focus on its industrial businesses over the past few years were going well until the pandemic. This trade looks like a bet that shares will trend higher over the next two years.

    Action to take: This deep-in-the-money trade suggests that a trader sees a tremendous upside ahead. The option will provide a better percentage return than buying shares now, and there appears to be little time premium priced into these options.

    For longer-term traders, or even those who would be inclined to buy shares here, this trade makes a lot of sense. Shorter-term traders expecting a bounce sooner may want to look at the January 2021 $8 calls. Trading for around $0.50 per contract, a quick rally could lead to a quick double or in these options.

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