General Electric shares have been in free fall, but options traders are betting on a resurgence ahead.
The stock has plunged to near-decade lows this year, down 47 percent over the last 12 months. However, since hitting a low in April, the shares have seen some relief, rallying 12 percent. And options traders are betting the stock could be gearing up for a bigger rally.
On Thursday, shares of General Electric jumped nearly 3 percent setting off a surge in bullish trading activity, with call options doubling that of puts. "Options Action" trader Mike Khouw noted that a block of traders purchased the January 2019 20 calls for an average price of 15 cents per contract.
"Those are bets that [GE] is going to be above $20 by January expiration," Khouw said Thursday on CNBC's "Fast Money." This trade implies a more than 30 percent rally for shares of GE from their current levels.
"Fast Money" trader Steve Grasso, who's long the stock, also shared in the optimism. He believes investor concerns surrounding another potential dividend cut have now been included in the stock.
"It's leveled off at a price that's still higher than recent lows," he said. "It's going to be higher from here."
GE posted its worst one-day drop in nearly a decade earlier this week after disappointing guidance from CEO John Flannery sent the stock plunging more than 7 percent. Despite the sell-off, shares of the industrial giant are still up more than 7 percent this quarter.
FactSet analysts currently have General Electric at a hold rating with an average price target of $16.42.
Shares of GE were trading lower Friday, around $14.48.
