Options Action: Volatility Rises for GE
Options traders seem to think General Electric is in for some turbulent times, according to one options analyst.
"What's interesting to look at with GE is the fact that its implied volatility has been consistently rising over about the past five sessions -- 43 percent over the past five sessions -- and yesterday, even after the news that new bond issuances from GE Capital would be eligible for insurance under this new government temporary liquidity provision, its implied volatility continued to go higher," said Rebecca Darst, equity options analyst with TheStreet.com. "As the stock reached a new low, the implied volatility spiked 25 percent. Puts and calls traded in relative balance in GE yesterday, although the volume was very high."
One trader apparently is making an intriguing long bet in the stock, Darst said. (See her full comments in the video)
"One particular strategy that caught my attention was a sizable play -- it involved 7,500 lots, I believe -- where a trader sold December 17.50 puts and bought June 15 puts. Now, we can't confirm that the December put play was an opening position, but the June position certainly was. It may have been a case of a trader simply rolling out a long position in December out to June. You can take away a couple of messages from this: First, the trader believes that December put implied volatility is overpriced, relative to June, and feels that June implied volatility is not priced high enough yet, and it may simply be a sign of traders hunkering down for the long haul, getting used to a reality of lower earnings, continued very challenging economic environment. We saw that sort of positioning not just in GE, but in a number of other names yesterday."
General Electric is the parent company of CNBC and CNBC.com.
Options traffic for GE
Who owns GE stock?
Disclosure information was not available for Darst.