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Caterpillar Again. An Attempt To Explain The Concept of Creating a "Spread".

Caterpillar just had earnings come out and they were lousy. Read my January 26th blog, That was only only four days ago and it's easy to find. There you will find charts and option quotes which I just updated to complete the story showing how crazy it's price drop was. Holding both both a Call and Put at the same time just prior to the release of it's earning report could have worked out nicely, or better yet, just the purchasing of a Put. Here is a chart of how it sold off in the first fifty five minutes of trading this morning. It's a respectable drop which made all Put holders very happy. So here is a new question. Is there now an opportunity to play a rebound? Today is January 25th and there are beaten up Call options on it that expire tomorrow. Buying a Call option on it that expires in one day is an extreme risk, especially with all of Trump's meddlings. Now look at the pricing of the "one-day-to-expiring" Caterpillar Call option. Can you see how t...
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Boeing and Caterpillar

These blogs are starting to get repetitive. Blogs about Boeing and Caterpillar rising after Monday's meltdown. The DJIA was up today over 500 points and here is how these two companies did.
Look at the extremely light volume in both of these two Call option series. What does this tell us? Two things. It tells us about the sophistication level of today's traders. Getting in on a Thursday looking for a one day bounce is not a smart way to trade. Secondly, these are both "in-the-money" postions and the best percentage kicks happen with near-to-the-money options. Let me show you the swings on the 195.00 and 197.50 Caterpillar Calls today. Both were up over 200%.
In both of these series the volume of trading exceeded the open interest levels. Out-of-the money postions in near term expiring Calls is where the action is on days that enjoy 500 point rallies.

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