IB Options Brief: General Electric Co. (GE) & Sprint Nextel Corp. (S)
GE ñ General Electric Co.
Sizable bearish put spreads on General Electric this morning indicate traders are bracing for the price of the underlying to potentially pull back to levels not seen since July 2009. Shares in GE currently trade just 0.30% lower on the day at $15.42 as of 12:20 pm ET.
It looks like investors purchased around 20,000 puts at the November $15 strike for an average premium of $0.81 apiece, and sold the same number of puts at the lower November $12 strike at an average premium of $0.24 each. Premium paid for the spread amounts to an average of $0.57 per contract, which positions traders to profit should GEís shares drop 6.4% to breach the average breakeven price of $14.43 by November expiration.
Bearish players could make as much as $2.43 per contract in the event that shares in GE plunge 22.2% to trade below $12.00 at expiration day. Options implied volatility on GE is off its highest of the session, but remains elevated by 4.9% to stand at 42.82% in early-afternoon trade.
S ñ Sprint Nextel Corp.
Shares in Sprint Nextel Corp. are struggling to stay positive this afternoon, but fresh trading in November contract call options on the wireless provider suggest some market participants expect the price of the underlying to rebound before the year is out. Sprintís shares are currently flat on the day to arrive at $3.74 as of 12:55 pm in New York.
Investors exchanged more than 27,000 calls at the November $4.5 strike earlier in the session against open interest of 3,863 contracts. Not all of the interest was buying, but it does appear the majority of the contracts were purchased for an average premium of $0.23 apiece. Call buyers profit if shares in Sprint soar 26.5% in the next few months to top $4.73 by expiration day in November.
Shares in Sprint had mostly been humming along above $4.50 from March through much of July, but the stock took a turn for the worse in the most recent two weeks to surrender nearly 30% of its value. Options implied volatility on Sprint is up 21.1% at 65.43% this afternoon.
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