GE Vol Price Isn’t Happening

Andrew Giovinazzi

This week’s Pit Report stock is General Electric (Ticker: GE).

Hey Traders,

General Electric Co. (Ticker: GE) was founded by Thomas Edison and historically has been a hotbed of innovation.

That has been less the case recently, but they do make nuclear energy products, so full disclosure, I am long GE call options.

In Capitol Gains we like all things nuclear as that is the best green solution going forward.

But this is about volatility and, really, the decision on buy calls or buying calendars.

The vol will tell the story.

A Realization

GE realized vol is very low. What that means is GE is not moving too much from close-to-close.

The stock is currently running a 32% implied volatility. That means traders are buying options. As you can see below, there is some intraday movement, but the stock seems stuck around $84.

The 32% implied volatility is just in the middle, not too expensive and not too cheap. This type of volatility would better suit call calendars just out-of-the-money.

The stock is holding up well in a tough market this week, so call calendars would work best since they perform when the stock floats to the strike.

A 22% realized volatility means GE is trading much less than the implied volatility.

That makes it harder for straight calls to pay and easier for call calendars to pay. – AG

I think TLT is approaching an excellent buying opportunity. Between the low at 99.35 and the Fibonacci .618 retracement (98) of the October rally. These levels may see the bottom in TLT and a peak in US bond yields.

Bonds tell the story and if bond prices bottom and then CPI shows any lessening then TLT could be off to the races. If TLT bottoms that means the US Dollar peaks … Let’s take a look.

When the dollar peaks and turns back down and TLT bottoms and starts to rally it will set off a chain reaction of higher stocks and commodity prices. Never forget that bonds always lead stock trends.

This week’s Vol projections

Expect a quiet week of data and a drop in Vol… Here is the short-dated term structure and associated economic data points …