Caterpillar Options

Does this chart scare you?

It looks strong, right? What about this chart? It's Caterpillar.

Look at how it spiked down on the opening on the previous day and jumped up $20.00 and then went sideways for the rest of the day. This next chart shows that better. The spike down on the previous day can be considered a red flag.

As mentioned prevoiusly very few option traders have the guts to play options on the this stock. The same is true with John Deere. Now look at the closing price of the Caterpillar 865 and 860 series of Puts. They might look to be expensive however this stock can move quickly. Also look at how low the open interest is in both of these series.

So we are talking about making a $1,000.00 or $1.100.00 bet to the downside with three trading days left. In the recent few weeks we are witnessing more spikes. I talked in the past about Shopify sometimes spiking and they losing it's gain a few days later. Watch what is now happened to Caterpillar ten minutes into the opening.

A big drop. The 865 Puts we were first looking at trading at $11.00 have jumped to $54.00....

Looking at it now is there any point in buying in to catch it on the upside? Not really. It's to much of a risk whatever happens. Notice the present volume of trading of only 13 contracts trading in this series of options. No one is trading them. Now this news release at 11:41 a.m.

Why was I attracted to this. Well it was the second dip it had on the opening two days in a row.