Long time readers know that I've been bullish on GE for two months.
At the same time I don't have much respect for Mr. Immelt's management prowess.
It's either schizophrenia or art:
"The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function."Of course that quote is from Fitzgerald's 1936 Esquire essay "The Crack-Up", by which time his mental problems (and Zelda's) were quite advanced.
– F. Scott Fitzgerald
Will Rogers said of straddles:
“The reason political party platforms are so long is that when you straddle anything it takes a long time to explain it.”Not true of these guys,
From Schaeffer's Research:
Straddling General Electric
Options trader bets on a big move from this blue-chip conglomerate
Since mid-April, shares of General Electric Company (GE) have traded in a relatively tight range, hovering between $18.60 per share and $19.60 per share during this time frame. Even last week's turmoil on Tuesday and Friday failed to move GE more than a point in either direction. However, at least one options trader has placed a rather large bet that the stock is due for a sharp increase in volatility.
Drilling down on GE's option volume, I noticed some unusual activity today at the stock's June 19 call strike. Specifically, a block of 10,000 June 19 calls traded on the New York Stock Exchange (NYSE) at 9:57 a.m. Eastern time for the ask price of $0.87. Furthermore, this block was marked "straddle." As you would expect with a straddle position, I found the other half of this trade at GE's June 19 put, where 10,000 contracts changed hands at the same time on the same traded for the ask price of $0.78. By implementing this strategy, the trader needs GE to move sharply by the time these options expire at the close of trading on Friday, June 18; direction doesn't matter.
For those not familiar with this options strategy, a straddle is the simultaneous purchase or sale of an equal number of puts and calls on a given stock with the same expiration and strike price. The straddle purchaser is looking for a large move by the stock, one that exceeds the focus strike by more than the amount of the premium paid for both options.
The Anatomy of a General Electric Company Straddle
Drilling down on today's GE straddle, the trader purchased 10,000 June 19 calls for $870,000 -- ($0.87 * 100) * 10,000 = $870,000. At the same time, the trader also purchased 10,000 June 19 puts for $780,000 -- ($0.78 * 100) * 10,000 = $780,000. The total outlay for this position would be $1,650,000 -- $870,000 + $780,000 = $1,650,000.
There are two ways of determining the maximum profit on a straddle position. If GE jumps higher, then the maximum profit is theoretically unlimited, as there is no cap to how high the shares can rally. If GE plunges, the maximum profit is limited to the purchased strike minus the total debit paid. For this position, the maximum profit from a downside move is $17.35 -- 19 – 1.65 = $17.35 -- or $1,735 per contract.There are also two breakeven points for this position....MORE