GE – General Electric Co. – The 2.4% rebound in the price of GE’s shares to $16.33 today did not deter some wary options investors from building up bearish positions on the stock. Pessimistic players who are perhaps still smarting from the 22.5% pullback in General Electric’s share price from $19.69 on April 30, 2010, down to a low of $15.25 yesterday, purchased roughly 15,000 puts at the July $15 strike for an average premium of $0.54 per contract. The put options act as a safety net for investors long the underlying shares, or as a potential profit making strategy if investors hold no underlying position, should today’s rebound prove to be short-lived. Investors long the puts make money – or realize downside protection – if the diverse conglomerate’s shares fall 11.45% from the current price of $16.33 to breach the average breakeven point on the puts at $14.46 by July expiration.
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Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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