General Electric's disastrous earnings report caught traders off guard
AP Images / Richard Drew
- General Electric is paying the price for a poor earnings season, which saw it cut forward guidance
- Options traders were woefully unhedged for the drop, while short sellers weren't effectively positioned to profit from the decline
General Electric's stock is getting whacked after the company fell short of analyst estimates and slashed its forecast.
And to make matters worse, traders weren't braced for a drop that stretched as deep as 6.3% in the company's shares on Friday, a loss that has the stock at its lowest level in more than four years.
They were paying the lowest premium in eight years to protect against a decline in GE's stock, relative to bets on an increase, according to data compiled by Bloomberg. In other words, they were completely unhedged against the type of damage the stock incurred on Friday.
Business Insider / Joe Ciolli, data from Bloomberg
In addition, short interest on GE - a measure of bets that the stock will fall - actually declined heading into the earnings report, implying that investors were getting more confident in the preceding weeks. It was an acceleration of a bullish trend seen all year, as short interest as a percentage of shares available to loan has dropped precipitously from 2017 highs, according to IHS Markit data.
Based on trading activity, investors are scrambling to make up for lost ground. Less than 10 minutes into Friday's trading session, GE's stock had already seen two-thirds of the volume it normally sees in a full day.
Get the latest General Electric stock price here.
- Manchester United named world’s most valuable football club! MLS dominates top 50 list - the Messi effect?
- Rahul Dravid will have to reapply if he wants to continue as head coach after June: Jay Shah
- BPCL shares rally 5% after earnings announcement
- Markets bounce back in early trade on firm global trends; buying in ITC, Reliance
- Rupee trades in narrow range against US dollar in early trade
- Nothing Phone (2a) blue edition launched
- JNK India IPO allotment date
- JioCinema New Plans
- Realme Narzo 70 Launched
- Apple Let Loose event
- Elon Musk Apology
- RIL cash flows
- Charlie Munger
- Feedbank IPO allotment
- Tata IPO allotment
- Most generous retirement plans
- Broadcom lays off
- Cibil Score vs Cibil Report
- Birla and Bajaj in top Richest
- Nestle Sept 2023 report
- India Equity Market