A couple of weeks after
General Electric Co. (NYSE: GE )
announced worse-than-expected earnings, an investor boosted options
volume in the name by selling a hefty number of longer-dated puts.
The March 14 puts were active on the day Thursday as shares of the
conglomerate name edged up on the day.
At 12:47 p.m. EDT, a block of 5,200 out-of-the-money (OTM) March
14 puts crossed the tape for 98 cents per contract. This price was
the bid price when the volume hit the tape. Current open interest
in this line is just 231 contracts, indicating the investor
initiated the options action to open. The investor who sold this
lot to open will keep the entire premium collected as the maximum
profit if the stock is trading higher than the strike price at
March options expiration. If the stock is trading between the
strike price and the breakeven price of $13.02, the investor gives
back some of the credit.
Once the stock drops below the breakeven price, the investor
begins to lose money. If the stock continues to the downside and is
trading at zero at expiration, the investor loses a maximum of
$13.02 per contract. This trade is considered moderately bullish
because the position allows for roughly 19% of downside before the
investor begins to lose money.
A closer look at time and sales shows the investor traded this
options action with a stock position, which turns this directional
play into a delta-neutral volatility bet. However, this article
highlights just the put volume on the tape.
GE shares gained five cents to $16.10 during afternoon despite
the broad-market weakness so far on the day. On July 16, GE
announced earnings of 30 cents per share and beat estimates by
three cents. The stock dipped to a recent low of $13.97 at the
beginning of the month, but has since gained roughly 15%. It looks
like at least one investor expects the stock to hit a floor during
the next several months and will be trading around its current
level or higher at March expiration.