Caterpillar has been grinding higher for months, yielding significant returns on upside option positions that expire today.
On May 9, Investute’s tracking systems detected the purchase of 4,200 June $105 calls for $0.65 to $0.73 with shares at $100.19. Volume was above the strike’s open interest, indicating that these were new positions.
Today those calls traded up to $1.76, a profit of more than 150 percent. The stock was up less than 6.5 percent in the same time frame, underscoring the kind of leverage that can be obtained through options.
Long calls lock in the price where the stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.
CAT rose 1.61 percent today to close at $106.40. The construction-equipment giant gapped higher after strong quarterly results on April 25.