Eleventh-Hour Option Traders Mob Caterpillar Inc. (CAT) Post-Earnings

Both puts and calls are trading at an accelerated clip on Caterpillar Inc. (NYSE:CAT) today

by Karee Venema

Published on Apr 23, 2015 at 11:17 AM
Updated on Jun 24, 2020 at 10:16 AM

After being up 3.1% earlier, Caterpillar Inc. (NYSE:CAT) was last seen 0.6% higher at $85.35, as traders weigh the company's standout first-quarter earnings report against a "challenging" outlook for the rest of the year. Meanwhile, speculators are swarming CAT's options pits -- with volume running at six times the average intraday pace -- but are seemingly split on the equity's near-term trajectory.

On the put side, CAT's weekly 4/24 85 strike has garnered notable attention, and it appears new positions are being purchased here. By initiating the long puts, traders expect CAT to slide south of $85 through tomorrow's close -- when the weekly series expires.

Elsewhere, eleventh-hour call players have set their sights on the stock's weekly 4/24 87 strike, where buy-to-open activity could be occurring. If traders are indeed buying calls, the goal is for CAT to rally north of the $87 mark over the next two sessions.

Widening the sentiment scope reveals call buyers have dominated CAT's options arena in the weeks leading up to this morning's results. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day call/put volume ratio of 1.94 ranks just 2 percentage points from a 52-week peak.

Outside of the options pits, though, sentiment is more skeptical of a stock that's shed about one-fifth of its value since hitting its most recent high of $107.12 in late November. Of the 19 analysts covering the shares, 14 maintain a "hold" or worse rating. Additionally, Caterpillar Inc.'s (NYSE:CAT) average 12-month price target of $82.70 stands at a discount to current trading levels.


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