Options strategies on General Electric allow investors to manage risk, generate income, or speculate on price movements depending on their market outlook and volatility expectations. Whether you're writing covered calls to collect premium on shares you already own or buying protective puts to hedge downside risk, the choice hinges on GE's implied volatility, your time horizon, and how much capital you're willing to put at risk. Understanding the mechanics of each strategy helps you match the right tool to your specific situation.
Key takeaways
- Covered calls on GE stock let you generate income by selling call options against shares you own, capping upside in exchange for premium collection
- Protective puts act as insurance, giving you the right to sell GE at a predetermined price if the stock falls below your risk tolerance
- Implied volatility on General Electric options affects premium prices—higher IV means pricier options, which benefits premium sellers and increases costs for buyers
- Your choice of strategy depends on whether you expect GE to stay range-bound, rally, or decline over your investment timeline
- Options carry expiration dates and leverage, so position sizing and risk management matter more than with outright stock ownership
How do covered calls work on General Electric stock?
A covered call involves owning 100 shares of GE and selling one call option contract against those shares. You collect premium upfront from the buyer, who gains the right to purchase your shares at the strike price before expiration. If GE stays below the strike, you keep the premium and your shares. If the stock rises above the strike, you'll likely have your shares called away at the strike price, missing out on further gains but still profiting from the premium plus any appreciation up to the strike.
This strategy works well when you expect GE to trade sideways or drift modestly higher. The premium you collect reduces your cost basis and provides a cushion if the stock dips slightly. For example, if you own GE shares and sell a call with a strike 5% above the current price, you're essentially betting the stock won't surge past that level before expiration. You're trading potential upside for immediate income.
Covered call: An options strategy where you own shares of a stock and sell call options against those shares to generate premium income. You're obligated to sell at the strike price if the buyer exercises the option.
The risk is opportunity cost. If General Electric announces a major contract win or sees a sector rally that pushes the stock sharply higher, you'll miss those gains above the strike. You also still face downside risk—the premium you collected only offsets a small portion of a significant decline. This isn't a hedge against falling prices; it's an income play that assumes stability or modest gains.
When should you consider protective puts on GE?
Protective puts give you the right to sell GE shares at a specific price, functioning as insurance against a decline. You pay a premium for this protection, and if the stock falls below the put's strike price, you can sell at the strike regardless of how low the market price goes. If GE stays flat or rises, the put expires worthless and you're out the premium—but you keep any gains in the stock.
This strategy makes sense when you want to hold GE long-term but worry about near-term volatility or a specific event risk. Maybe earnings are coming up and you're unsure how the market will react, or the industrial sector faces macroeconomic headwinds you can't predict. Buying a put lets you stay invested while defining your maximum loss.
The trade-off is cost. Protective puts aren't free, and if nothing bad happens, you've paid for insurance you didn't need. Think of it like paying for car insurance every month—you hope you never use it, but you're covered if something goes wrong. The premium you pay depends heavily on implied volatility and how far out of the money you set the strike. A put closer to the current stock price costs more but offers tighter protection.
What does implied volatility tell you about GE options?
Implied volatility reflects the market's expectation of how much GE's stock price might swing before the option expires. Higher IV means options are more expensive because the market anticipates bigger price movements—and bigger movements increase the chance an option ends up in the money. Lower IV means cheaper options and an expectation of calmer price action.
When GE's implied volatility is elevated, selling strategies like covered calls become more attractive because you collect higher premiums. Conversely, buying strategies like protective puts or outright calls get pricier, so you need a stronger conviction that the stock will move enough to justify the cost. If IV is low, buying options is cheaper but selling them brings in less income.
Implied volatility (IV): A measure derived from option prices that estimates how much the market expects a stock to move. Higher IV increases option premiums for both buyers and sellers.
You can check GE's current IV against its historical range to gauge whether options are relatively expensive or cheap. If IV is near the high end of its range, the market is pricing in more uncertainty—maybe around an earnings report or sector news. If IV is low, the market expects stability. This context shapes which strategy makes the most sense at any given time.
How do you choose between covered calls and protective puts?
Your outlook drives the decision. Covered calls suit a neutral to moderately bullish view where you want income and don't expect a sharp rally. You're willing to cap upside in exchange for premium. Protective puts fit when you're bullish long-term but concerned about short-term downside—you want to stay invested but limit losses.
Consider your existing position too. If you already own GE shares and want to squeeze extra return out of a stock you plan to hold, covered calls add yield without requiring new capital. If you're worried about a pullback but don't want to sell your shares and trigger taxes or exit a position you believe in, protective puts let you hedge without liquidating.
Risk tolerance matters. Covered calls reduce risk slightly through premium income but don't protect against major declines. Protective puts cost money upfront but define your worst-case scenario. Some investors combine both in a collar strategy—selling a call to finance the purchase of a put—but that narrows both upside and downside, effectively locking in a range.
What are the mechanics of trading General Electric options?
GE options trade in standard contracts representing 100 shares each. You'll choose an expiration date and a strike price. Shorter expirations mean less time for the stock to move, so premiums are lower. Longer expirations give more time for price swings, increasing premium but also cost.
Strike prices come in increments, and the relationship between the strike and the current stock price determines whether the option is in the money, at the money, or out of the money. An out-of-the-money call has a strike above the current price; an out-of-the-money put has a strike below. The farther out of the money, the cheaper the option but the less likely it pays off.
Liquidity matters. GE is a large-cap stock with active options markets, so bid-ask spreads tend to be tight and you can enter and exit positions without significant slippage. Check open interest and volume on the specific contract you're considering—higher numbers mean easier execution and fairer pricing.
How does time decay affect your GE options strategy?
Options lose value as expiration approaches, a phenomenon called time decay or theta. This works in favor of option sellers and against option buyers. If you're selling covered calls on General Electric, time decay is your friend—every day that passes without the stock surging above your strike, the option loses a bit of value, increasing your profit.
If you're buying protective puts, time decay is a cost. The longer GE stays above your put's strike, the more value the option bleeds away. You're paying for the right to sell at a certain price, and if you never need to exercise that right, the premium disappears entirely.
Time decay (theta): The rate at which an option loses value as it approaches expiration, all else equal. Option sellers benefit from time decay; buyers pay for it.
Time decay accelerates in the final weeks before expiration. An option with 60 days until expiration loses value more slowly than one with 10 days remaining. This is why many covered call sellers use monthly expirations—they can collect premium more frequently and adjust their strikes based on how the stock behaves.
What risks should you watch when using options on GE?
Assignment risk applies to covered calls. If GE rallies past your strike, the buyer can exercise early, forcing you to sell your shares before you planned. You'll miss further upside and may face tax consequences if you're holding the stock in a taxable account. Early assignment is more common near expiration or when the stock pays a dividend.
Leverage risk affects any options position. A small percentage move in GE's stock can mean a large percentage change in the option's value. This magnifies gains but also losses. If you buy a call or put and the stock doesn't move as expected, you can lose the entire premium even if your directional view was only slightly off or mistimed.
Liquidity risk can bite if you're trading options with wide bid-ask spreads or low volume. You might pay more to enter a position and receive less when you exit, eroding profitability. Stick to contracts with reasonable open interest and narrow spreads to minimize this.
Expiration risk means you're working against a clock. Unlike owning stock, which you can hold indefinitely, options expire worthless if they're out of the money at expiration. You need to be right about direction and timing, not just one or the other.
Try it yourself
Want to run this kind of analysis on your own? Copy any of these prompts and paste them into the Rallies AI Research Assistant:
- Walk me through the best options strategies for GE stock — how would covered calls work here, when would I consider protective puts, and what does GE's implied volatility tell me about which strategy makes the most sense?
- What options strategies do investors commonly use on General Electric? Walk me through covered calls and puts on GE.
- Show me how to compare GE's implied volatility to its historical range and explain what that tells me about whether I should buy or sell options right now.
Frequently asked questions
What are the best General Electric covered calls to sell?
The best covered calls depend on your goals and market outlook. If you want higher premium income, sell strikes closer to the current stock price or choose near-term expirations when time decay works fastest. If you prefer more upside potential before assignment, sell strikes farther out of the money with longer expirations. Balance premium income against the likelihood of losing your shares.
How much does GE options trading cost?
Costs include the option premium itself plus any brokerage commissions or fees. Many brokers charge a base fee per trade plus a per-contract fee, though some offer commission-free options trading. The premium you pay or collect depends on the strike price, expiration date, and implied volatility. Factor in bid-ask spreads too, which represent the difference between what buyers pay and sellers receive.
Can you lose more than your investment with GE options?
If you buy a call or put, your maximum loss is the premium you paid—you can't lose more than that. If you sell a naked call without owning the stock, you face unlimited risk because the stock can rise indefinitely. Covered calls limit this risk because you own the underlying shares. Selling naked puts exposes you to losses if the stock falls to zero, though you keep the premium as a cushion.
How do you know when GE's implied volatility is high or low?
Compare current implied volatility to GE's historical IV range, often shown as an IV rank or IV percentile. An IV rank of 80 means current volatility is higher than 80% of readings over a lookback period, suggesting options are relatively expensive. An IV rank of 20 means volatility is near the low end, making options cheaper. Many platforms display this data alongside option chains.
What happens if you hold a GE option until expiration?
If the option is in the money at expiration, it will likely be exercised automatically—you'll buy or sell shares at the strike price depending on whether it's a call or put. If the option is out of the money, it expires worthless and you lose the premium paid or keep the premium collected. Some brokers automatically close positions before expiration to avoid assignment risk.
Do General Electric options pay dividends?
Options themselves don't pay dividends, but if you own GE shares and sell covered calls, you still receive any dividends the stock pays as long as you hold the shares on the ex-dividend date. If your shares are called away before the ex-dividend date, you won't receive that dividend. Buyers of calls don't receive dividends unless they exercise and own the stock.
Can you use options to hedge a large GE position?
Protective puts are a common hedge for large stock positions. If you own a significant amount of GE and want downside protection, buying puts at a strike below the current price defines your maximum loss. You can also sell covered calls to generate income that offsets some of the put premium, creating a collar that limits both upside and downside. The right hedge depends on how much protection you want and how much you're willing to pay.
Bottom line
General Electric options strategies give you tools to generate income, manage risk, or speculate on price moves based on your outlook and volatility expectations. Covered calls work when you want premium income and can accept capped upside, while protective puts provide insurance against declines at the cost of the premium. Implied volatility guides whether options are expensive or cheap relative to history, shaping which strategy offers the best risk-reward at any moment.
Before committing capital, understand the mechanics, risks, and trade-offs of each approach. Learn more about stock analysis techniques and how to evaluate options within a broader portfolio on the stock analysis hub, and explore GE-specific data on the GE stock page.
Disclaimer: This article is for educational and informational purposes only. It does not constitute investment advice, financial advice, trading advice, or any other type of advice. Rallies.ai does not recommend that any security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. All investments involve risk, including the possible loss of principal. Past performance does not guarantee future results. Before making any investment decision, consult with a qualified financial advisor and conduct your own research.
Written by Gav Blaxberg, CEO of WOLF Financial and Co-Founder of Rallies.ai.
