It’s time to double down on General Electric Company (NYSE:GE), but it’s not what you think. With GE stock’s prospects going from bad to worse, capitalizing on General Electric remains the domain of bears and ripe for another bear put spread investment. Let me explain.
Just when some investors may have felt conditions couldn’t possibly get any worse for GE stock, it has. Shares of General Electric have spiraled lower by roughly 8% the past two sessions in a quick return to last year’s multi-year lows.
Behind the investor backlash and following 2017’s train wreck punctuated by November’s slashed dividend; news of massive insurance portfolio charges and plans to breakup General Electric’s major divisions into separate investment units, has not sat well with investors.
Spin-offs can prove fruitful and many see the move at General Electric as being overdue. The problem is investors appear worried GE stock will be worth less than the sum of its parts.
Not that Wall Street hasn’t been wrong on occasion and prone to overreacting. It has. But this strategist is still of the mind GE will continue to bring more good things to life for bears before being able to find a new and bullish narrative.
GE Stock Weekly Chart
As the monthly chart of GE stock attests, there’s definitely more to life than collecting quarterly dividends. Bottom-line, the past decade has been a painful experience for General Electric’s long-term stockholders. Particular pain has of course been felt over the past year as shares of GE collapsed lower from its market-lagging, but bullish uptrend.
Looking forward, uncertainty surrounding the company and an obvious oversold condition on the monthly time frame, does lend GE stock to being a possible contrarian play. But I’m not a buyer of that type proposition.
In my view, Wednesday’s ‘mini’ triple-bottom pattern on the daily price chart is prone to failure as GE has already failed to hold the flash crash double bottom and 50% support level dating back to the low of the financial crisis.
GE Stock Bear Put Spread
There’s a saying, if it ain’t broke, don’t fix it. Given our dour outlook and the fact a proffered December bear put spread worked so well in returning 400% to traders, I believe seconds are in order. Reviewing GE stock’s options board, one favored combination is the March $16/$15 bear vertical.
Priced for 17 cents with shares at $17.27, the risk is contained to 1% of being short GE shares. If GE continues lower a max payout of 83 cents for a potential return of more than 400% below $15 at expiration can be captured. Bottom-line, with earnings a week away I’m hopeful GE can once more bring good things to life for bears.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
