Options Traders Eye Caterpillar Stock After Earnings

CAT is also withholding further guidance due to the pandemic

Deputy Editor
Oct 27, 2020 at 10:19 AM
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The shares of Caterpillar Inc. (NYSE:CAT) are down 2.6% at $158.85, despite reporting adjusted third-quarter earnings of $1.34 per share on $9.88 billion in revenue, both of which topped Wall Street's forecasts. However, the heavy equipment maker also said it would withhold guidance, with the coronavirus pandemic still taking its toll on the global economy. 

In our earnings preview, CAT was trading near all-time high territory. Since then though, the shares have shed 6% in the last five trading days, although the shares' 40-day moving average has contained today's pullback. Still, Caterpillar stock boasts an impressive 14.8% year-over-year gain.

Today's options pits are full of activity on both sides of the tape, with calls and puts trading at roughly the same rate. In fact, in the first hour of trading, over 5,000 calls and 4,500 have already exchanged hands -- triple the intraday average and volume pacing in the 99th percentile of its annual range. The most popular is the weekly 10/30 155-strike put, followed by the 170-strike call from the same series.

Lastly, now looks to be a prime time to enter with options. Caterpillar stock's Schaeffer's Volatility Index (SVI) of 40% sits in the 22nd percentile of all other readings from the past year -- a boon for premium buyers.


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