$CAT bears triple their money

Caterpillar pulled back today, handing sizable profits to downside option traders.

On June 15, Investitute’s market scanners found that 1,500 Weekly $148 puts expiring this Friday were purchased for $1.75 with shares at $148.80. Volume was well above the strike’s open interest of 935 contracts, indicating that this was fresh buying.

Those puts sold for $5.96 today, more than 3 times their purchase price. The stock dropped 4.3% at the same time, underscoring how quickly options can far outperform moves in their underlying shares.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.

CAT was down 3.62% today to close at $143.30. The construction-equipment giant fell on concerns over global trade conflicts.