• Chart of the Day: Caterpillar (CAT)

    by  • January 25, 2013 11:25 am • Quick Hits • 0 Comments

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    Today’s chart is of Caterpillar (CAT) which manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide.

    Ticker:  Caterpillar (CAT)

    Strategy:  Aggressive Straddle Trade, i.e. Feb-01 95-strike straddle

    What I Am Looking At:

    • Industrials Select Sector SPDR (XLI) up nearly 7 percent year-to-date
    • CAT also up nearly 7 percent year-to-date
    • Reports earnings Monday, January 28th before market opens
    • Over the past 10 years the average maximum one-day reaction to earnings is 5.6 percent  (absolute value)
    • Currently the 95-strike straddle (weekly Feb 1st series) pricing in a move of 3.6 percent
    • $116.50-117.00 all-time high area made in 2011 and 2012
    • Recent rejection from 50 percent retracement of the 2012 top to the 2012 bottom but shares still remain in a short-term uptrend
    • Peak put interest and large call open interest reside at the 95-strike, any unwinds could create dramatic moves in the shares
    • Short interest has increased 60 percent since March of last year, represents nearly 3 percent of the float
    • 9 out of 20 analysts rate the shares a “strong  buy”
    • 50-day buy-to-open put/call ratio is .90, no extremes in sentiment among option players



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    Tony Venosa, CMT is a Senior Options Strategist and works on the trading desk at Schaeffer’s Investment Research. He joined Schaeffer’s in 2010. He has worked in the finance industry for over 15 years. He began his career as a trading assistant in Chicago on the floor of the Chicago Mercantile Exchange. He later moved upstairs and worked as a commodities broker on both the retail and hedging side. He left the brokerage industry to begin his trading career as a proprietary equities trader at a Chicago firm. In 2000, Tony moved backed to his hometown and continued trading his personal account. He later went on to earn his Chartered Market Technician designation. He earned a B.S. in Finance from Miami University. Tony’s main focus is short-term directional option trading.


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