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%
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.
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.
1. A bear call spread is not a 'short'. Consult table. 2. The main information in the article cited is NOT about the job cuts.
http://finance.yahoo.com/news/caterpillar-cat-hits-rough-waters-192507887.html http://stockcharts.com/freecharts/perf.php?CAT,DE,JOY,TEX
$CAT Well so far Buffet took a hit this year with $CAT, $IBM, and $COP. Compared to his losses YTD, i dont feel so bad.