Options Trading News

February 26, 2013  Tue 10:40 AM CT

A large trader is looking for higher volatility in Caterpillar.

optionMONSTER's Depth Charge system shows that a trader bought 3,000 January 60 puts for the ask price of $1.50. The volume was twice the strike's open interest before the session began, clearly showing that this is a new position.

Less than a minute later, a block of 30,000 CAT shares was purchased for $89. The delta of the options was -0.1, so this would make the overall position market-neutral and thereby focused on volatility rather than the stock's direction. (See our Education section)

CAT is up fractionally today at $89.19. The construction-equipment giant gapped higher on the first day of the year and tested resistance just below $100 at the start of February, but it has been falling since.

More than 24,500 CAT options have already changed hands today, compared with a full-session average of 15,440 in the last month.
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The art of trading

As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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