Thursday, January 20, 2011

General Electric Earnings Friday Morning: Option Buyers Like Wild-Ass Speculation (GE)

After a week which saw the stock do an odd little price spike to $18.99 on Tuesday and a decline of 2.6% between Monday's close and Wednesday's, the stock showed some optimism today, opening down and closing up a dime.
With more on optimism here's Barron's The Striking Price column:
Betting on GE's Continued Recovery
Options investors are wagering that the industrial giant's shares surge on Friday's earnings report.
In the past six months, General Electric (ticker: GE) has gained some 26%, advancing smartly since the stock hit a 52-week low of just under $14.

 Now, with fourth-quarter earnings scheduled to be released early Friday, investors are stacking up bets in the options market that GE will move to new high prices.

Speculators have amassed significant positions in GE's January $20 calls, which would increase in value if the $18.33 stock pushes past $20. At this moment, the bulls need a massive earnings day move for the stock to jump 9% so the calls do not expire worthless.

Anything could happen if GE Capital, long regarded as GE's piggy bank, is doing well. In the past, before GE Capital became enmeshed in the credit-crisis woes, Wall Street looked at the unit as Jack Welch's piggy bank.

If the former GE chief executive ever needed to add a few pennies to earnings, GE Capital was there to oblige. Now, the question exists as to whether GE Capital has recovered enough to return to its historical role as GE's profit engine.

The interest in GE's January $20 calls, which expire at Friday's close and which recently traded at two cents, suggests some traders are wagering on a big move even though it is at odds with overall investor sentiment....MORE

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Repost: "General Electric Earnings: What to Expect (GE)"

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