Caterpillar Options Traders Active After Earnings

CAT reported a Q2 profit beat and upwardly revised its full-year forecast

Jul 30, 2018 at 10:29 AM
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The shares of Caterpillar Inc. (NYSE:CAT) were up 2.9% earlier -- last seen trading 0.2% higher at $142.89 -- after the construction concern reported second-quarter adjusted earnings and revenue beats of $2.97 per share and $14.01 billion, respectively. The Dow component also raised its full-year profit forecast, said it will raise prices to offset higher costs related to tariffs, and will use the remaining $1.25 billion of a previously approved $10 billion buyback plan by year's end.

Today's price action has the Dow stock testing recent resistance at its 40-day moving average. What's more, CAT's intraday peak brought the shares up near their 80-day trendline, which hasn't been surpassed on a daily closing basis since June 14. However, CAT's longer-term trend has been lower, with the shares stuck underneath a trendline connecting lower highs since January.

Options traders have been growing increasingly bullish on Caterpillar stock ahead of earnings. While the August 145 call is home to peak open interest of 14,465 contracts, the August 150 call has seen the largest increase in open interest over the past 10 trading days -- with 7,260 contracts added. Data from the major options exchanges confirms buy-to-open activity at each strike, meaning options traders have been betting on a strong August for CAT.

Speculative players are active this morning, too. At last check, around 18,250 calls and 16,100 puts have changed hands -- six times what's typically seen at this point in the day. It looks like some traders are betting on the $150 level to hold as resistance through week's end, with potential sell-to-open activity spotted at the weekly 8/3 150-strike call.

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