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Caterpillar Inc. (NYSE:CAT) stock news and links

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Cat options update

Seeking Alpha posted a summary yesterday of what’s up in the Caterpillar options market:

Caterpillar Inc. (CAT) – Despite a share price decline in today’s session to $43.42 option investors retain a positive bias on Caterpillar’s prospects no doubt with what one might coin as the Obama-put. Media is today banding about news of a proposed $850 billion stimulus package in the works, which is expected to address infrastructure and would be a boon to heavy equipment makers – at least that’s the theory. Investors used the January 45 strike call option to add 11,000 more bullish bets on the company and paid a 2.55 premium, which implies that Caterpillar needs to rally to $47.55 by expiration for investors holding calls to make money. Through Wednesday investors held 16,014 lots of open interest at the strike price.

You got all that? Eleven thousand bets that the stock’ll go over $47.55 by January expiration is not a trivial gamble. But folks play options with money they can afford to lose (or use them to hedge money they want to keep). Yahoo keeps a page of Cat options quotes here. Even if you don’t dabble in options (which requires cojones of iron), you can watch the supply and demand for puts and calls to get an idea of where options traders think the stock is going.

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Tom Mangan posted at 9:24 am December 19th, 2008 |

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