Traders bet that GE shares will shed another 20 percent in the next three months

Some traders see the slide in General Electric getting a lot worse.

GE shares shed more than 8 percent in Wednesday's trading session after several notes from renowned J.P. Morgan analyst Stephen Tusa highlighted ongoing issues with the company's struggling business lines and questioned the stock's valuation. On Tuesday, CEO Larry Culp told Tusa that GE's industrial cash flow would be negative for 2019.

And while some Wall Street analysts are getting more bullish on the company's turnaround efforts, "Options Action" trader Mike Khouw says the options market is telling a different — and more bearish — story.

"There's a lot going on in GE right now, and, unsurprisingly, there's a lot of options trading. How much? 800,000 contracts today. To put things in perspective, that's more than Apple and Facebook combined," he said Wednesday. "One of the areas that we saw a lot of activity was the puts."

Put options are non-obligatory contracts that allow traders to sell specific amounts of an underlying stock at a predetermined time and price point. Buying a put usually signifies a bearish bet against a given stock.

In GE's case, "the top five most active options were all puts," Khouw said. While some of them were likely tied to GE's plans to spin off some of its businesses, a large portion were betting on further weakness, he said.

"The area that I was looking at [was] the June 8 puts. I saw a block of 4,000 of those trading for 50 cents, quite a lot of premium when you consider how far out of the money those were," he said. "That would represent a decline below $7.50 for those to be profitable. Presumably, the options trader, then, is looking for the stock to move to the downside by at least 20 percent by June expiration."

A note from J.P. Morgan on Thursday seemed to agree with those traders, saying that sentiment in the options market was "overly optimistic" and arguing that "shares of GE are unlikely to breach $10 in the near term."

And while Khouw did see some bullish calls — options that allow buyers to pick up shares of a given stock at a preset time and price — being made in GE, the bottom line was clear:

"[In] the options flow today, we saw about 30 percent more bearish bets than bullish ones," the trader said.

GE shares gained 1 percent early on Thursday and are currently trading in the $9 range. Wall Street analysts are generally bullish on the stock, with an average price target of $11.57, according to FactSet estimates.