Caterpillar Calls. Trying To Make It Simple

So if you like the stock Caterpillar and want to play the upside on it using options you could buy these ones.

But why would you? They are up 46% on the day so the real money was made in buying them yesterday and selling them today. The stock would now have to go up about $25.00 in one month just to break even and everything above that price would be profits. If you now look at a thirty day chart you will see that's what it did last month.

These are "one month-out" options which are ten dollars "in-the-money" and they trade in a different fashion than short term options. Yet that not what I want to talk about. I note that only 13 contracts traded on this series on the day and the open interest in them stands at only 11. What does this tell us? 1) It tells us that professional money managers are totally lacking in their understandings of the dynamics of option trading. 2) It tells us that retails traders are to some degree misguided by the learning materials made available to the public on option price swings. 3) It tells us how backward the world of Ai is in writing computerized option trading programs recognizing market capitulations. Doesn't it seem kind of strange that thirty day options can go up in value that much in one day? Caterpillar has traded eradicately as of late. Look at todays action.

Imagine buying at 640 series of Calls that expire in one day for $6.00 at 10:40 a.m. to watch it jump to $23.78 at 1:14 p.m..

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Now this, a look at some of the statements made about Caterpillar today.

Now this. Look at Caterpillar's one year stock price. It has doubled in price. Why did it double in price when it's earnings have not doubled?

In previous blogs I have talked about how little interest there is in playing options on both Caterpillar and Deere. It appears to me that Caterpillar has gone up in price to quickly. Going forward, there is a cost involved in ramping up production facilities which has to be absorbed and it was noted that sales of mining equipment was off slightly. In my opinion, over the next few weeks Caterpillar is going to lose some of it's steam. Yet what do I know.