Unusual Options Activity: General Electric (GE)

Surge of in-the-money call buying.

The highest-volume option trade on Friday occurred in an unusual trade based on shares of General Electric (GE). The January 2020 $6 call options saw a surge in volume. With shares over $9, these options are about 50 percent in-the-money.

If GE shares rally, the option should move higher penny-for-penny. If shares drop, they could still have some value at expiration.

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  • With the number of unusual options usually focusing on short-term or near-the-money trades, this one stands out as a potential way to play a multi-month rally in shares between now and January while only paying about one-third the price of buying shares outright.

    Action to take: General Electric has been out of favor with the market for several years, but its new CEO has been active in restructuring the company along its old industrial lines with various asset sales and divestments. The company has also been weighed down by its business with Boeing and the 737 Max, so any improvement in that situation could lead shares to an immediate boost.

    Shares look like an interesting value here, but for the short-term profit potential, we like this unusual, deep-in-the-money trade, where a $330 cost per contract can give you the same dollar-for-dollar returns against buying 100 shares and paying at least $920.