At least one trader sees a massive surge higher in shares of General Electric (GE) this month. That’s based on the December 11th $8.50 calls. The option saw 956 contracts trade against a prior open interest of 107, for a nearly ten-fold rise in volume.
With shares around $7.70, shares would need to rally about 10 percent for the trade to move in-the-money. The call buyer paid about $0.26 for the option.
General Electric shares have been in rally mode in the past few weeks, following a strong earnings beat. That was a bit surprising, as the company’s jet engine division was expected to be a drag with air travel trends looking down.
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With shares heading higher, however, GE shares look on track to test the highs set earlier in the summer, right around the option’s strike price of $8.50.
Action to take: For traders betting on a short-term trend, this is a great option play. It’s inexpensive, but could pay off handsomely. Shares have traded in the $8.50 range, and if they hit that point quickly, the option could be good for high double-digit returns.
If shares head even higher, the option could move into triple-digit winning territory for traders. And given the low cost, there’s a minimal downside. As with most options trades this short, traders should look for a quick bounce to take some profits before expiration.