Why Options Bulls Should Target Caterpillar Stock

CAT recently brushed off a bear note from Citigroup

Aug 11, 2021 at 12:02 PM
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Blue-chip bellwether Caterpillar Inc. (NYSE:CAT) is pulling back to its 200-day moving average, which has acted as support for the equity in the past. Plus, the stock boasts a 55% year-over-year lead, and is up 14% in 2021, making now the perfect time to buy calls.
 
There’s plenty of room for upgrades, too. Of the 15 in coverage, only five call CAT a "strong buy," while nine say "hold" and one says "sell."
 
The stock also overcame a substantial rise in short interest, which tacked on 38% in the past six months, while CAT added 8%, a sign of underlying strength in the equity. What’s more, the security managed to quickly brush off a downgrade from Citigroup to "neutral" from "buy" earlier in the year.
 
Caterpillar calls can be had for a relative bargain right now. This is per the security’s Schaeffer’s Volatility Index (SVI) of 24%, which stands higher than just 13% of readings from the past year, suggesting options traders are pricing in low volatility expectations at the moment. Even better, the stock’s Schaeffer’s Volatility Scorecard (SVS) ranks at 70 out of a possible 100. This implies CAT has exceeded these volatility expectations – a boon for buyers.
 
Subscribers to Schaeffer's Weekend Trader options recommendation service received this CAT commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

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