Spread-trading activity in General Electric (NYSE: GE) shares

General Electric (NYSE: GE) saw some action in its options pits yesterday, as investors traded a front-month call spread and took advantage of the newly-opened April series of options to open a short calendar spread (also known as a horizontal spread or time spread).

All of this activity transpired without any news driving the shares. Earnings aren’t due until April 16th (expiration for April options), when the bellwether is expected to issue its results before the open. In unremarkable trading yesterday, GE shares edged eight cents higher to $16.25.

First up: the call spread seller. Investors who likely have a moderately bearish view on GE sold the March 16-strike calls and simultaneously bought the 17.5-strike calls. It appears as though 10,000 of these spreads were sold for a net credit of 45 cents each. If GE is trading below 16 when these options expire on the 19th of next month, the investor will keep 100% of this credit. The maximum loss, meanwhile, is capped at $1.05. Breakeven for this strategy is $16.45.

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Elsewhere, we saw selling in the June 16 puts and buying in the April 16 puts, creating a short calendar spread. The June 16 puts saw more nearly 13,000 contracts trade, though not all of these translated into new open interest. By the day’s conclusion, these puts were down eight cents with the stock up eight cents; this is more of a decline in the option’s price than its delta of 43% would suggest, indicating the presence of put sellers.

The April 16 puts saw more than 14,500 contracts trade, 12,620 of which emerged this morning as new open interest. Our floor sources indicate that a spread totaling 5,000 contracts was sold for 36 cents, as traders bought the shorter-term call and sold the longer-term position. The best-case scenario for this trader is for the puts to lose value, allowing the spread to be repurchased for less than 36 cents, keeping the difference as profit.

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