Caterpillar

O

oldnemesis

http://finance.yahoo.com/news/caterpillar-announces-job-cuts-10k-160704869.html

http://stockcharts.com/h-sc/ui?s=cat

Trade:
With CAT at 64.98
May 80/85 bear call spread for a net credit of $45
Yield = 45/455 = 9.8% in 237 days or 15.2% annualized
Prob = 80%

Price.............. Profit / Loss............. ROM %
50.00.................. 45.00..................... 9.80%
60.00.................. 45.00..................... 9.80%
70.00.................. 45.00..................... 9.80%
80.00.................. 45.00..................... 9.80%
80.45.................... 0.00..................... 0.00%
83.01............... (256.20)................. -51.24%
85.00............... (455.00).................. -91.00%
95.00............... (455.00).................. -91.00%
100.00............. (455.00).................. -91.00%
 
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Jobs cuts are usually bullish for a company. So I would have gone with a bull put spread.


  • CAT at $64.98
  • Sell May 2016 55.00 Put at $2.94
  • Buy May 2016 50.00 Put at $1.90
  • Credit $1.04


EDIT: Having both spread positions open simultaneously could also be considered.



:)
 
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Pricechange said:
its dropped quit a bit already
More...


Yes ..... to the "untrained eye" CAT has dropped quit a bit on the layoff news and that is a bearish sign. Perhaps the sell off was a knee jerk reaction instead? Labor is very expensive and the layoffs should be bullish for CAT.






:)
 
Sold to you OTM...I can see you ride ride the short bus!

I was saying that it has dropped quite a bit already and I wouldn't short it any further right now. If if hadn't dropped so far just recently, I would short it just to fade your call because your calls made here would normally be a contrarian play for me.
 
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