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By using this site, you agree to be bound by its terms of use. The full terms of use can be read here. If you do not agree to the terms of use, do not access or use this site.
Nothing presented is financial advice, trading advice or recommendations. Everything presented is the author's ideas only. The author accepts no liability for its use including errors and omissions. You alone are solely responsible for your own investing and trading. There are considerable risks involved in implementing any investment strategies and losses can be large. Trade at your own risk.

 

Jan 6  / Stocks - CAT
Strategies Mentioned : Married Put, Naked Put. Spread, Collar

Question About Caterpillar Naked Puts
Strategy Article

 I recently received this question from a reader. I don't give out specific trade advice but I did think this was worth a look.

QUESTION: Teddi,
Have you looked at CAT? I am looking at $90 Jan Puts, currently (1-5-11 @ 9:30 CST) trading at $0.78, stock is trading @ $93.75 Earnings announcement not until Jan 27, so expiration is before then. CAT has been in strong uptrend for some time. Appears as a good trade. Your thoughts?
ANSWER: I don't give out personal recommendations as it is important for every investor to develop their own goals and strategies. However I don't mind giving an opinion. Remember this is not financial advice or recommendations. Trade at your own risk. Caterpillar was a stock I loved in 2009. I sold out at $75.00 and have not looked at the stock since. First a look at the 1 month chart. Could CAT be in for some trouble?


This next chart is a 3 month view. It's easy to see the two levels of support and where the safe zone sits for those who want a little more premium. As a short term trade for two weeks is the $90 naked put strike worthwhile? For .78 cents the return is 0.86% which isn't bad. But at this lofty level it would be easy for the stock to fall below $90.00 within two weeks. However if someone wanted to own this stock and liked caterpillar at these levels ($90.00) then I see little wrong for two weeks. Would I do it? Absolutely not. I am not interested in owning Caterpillar at these levels. I believe it is over valued here. I prefer Feb $85 naked put strike which is paying over $1.00. But overall Caterpillar is too expensive for me, at these levels. As it does not interest me it will not be added to my stock portfolio.


 

 

 

 
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Disclaimer: There are considerable risks involved in all investment strategies. Trade at your own risk.
Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed or presented are financial advice, trading advice or recommendations. Fullyinformed.com is a private website. Everything presented and discussed are the author's ideas and opinions only.
By using this site, you agree to be bound by its terms of use. The full terms of use can be read here. If you do not agree to the terms of use, do not use this site. The author of fullyinformed.com assumes no liability for topics and ideas discussed, errors and omissions, ads and their content and external links. Any corporate insignia used are registered trademarks of their respective company or corporation and are being used for identification purposes only. All material copyrighted by FullyInformed.com. Reproduction in whole or in part prohibited. Copyright 2008

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