Options Action
Friday 5:30 PM ET, Saturday & Sunday 6:00 AM ET
Options Action

Options trader bets on a 20% plunge for industrial giant GE

VIDEO2:2802:28
Options trader bets $1.5 million on double-digit drop for General Electric

It will not be a summer to remember for General Electric, if one intrepid options trader gets their way. 

Of course, 2020 has already been a year to forget for GE and investors, with the stock plunging more than 48% and closing in on 30-year lows. If that isn't already grim enough, one options trader is so convinced that more pain is on the way, they're wagering $1.5 million on another 20% drop.

"We saw six times the average daily put volume [Wednesday], and some of that put volume is related to put volume activity that we've been seeing since late April, actually. So we saw some big bearish bets being made then, somebody was adjusting some of those bets today," Optimize Advisors President Michael Khouw said Wednesday on "Fast Money."

As Khouw explained, this particular trader sold their open position of 6/4-strike put spreads, and rolled their bearish position out to July by purchasing 43,500 July 5-puts for $0.33 per contract. Since each of those contracts is worth 100 shares of stock, this translates to a bet worth $1.5 million in premium that GE will drop another 20% from where the stock was trading during Wednesday's session. 

"I think it's not just the stock that's giving us some clues as to why [this trader] might be doing that," said Khouw. "Take a look at where GE's debt is trading. That's been trading very poorly throughout the year and also quite recently. So obviously, these traders are believing that there's still some further weakness for the equity."

GE was trading 3% lower in Thursday's session. 

 

Disclaimer