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Sunday, February 5, 2023


Weekly Put Buyers Eye Further Downside In Caterpillar

Today’s tickers: CAT, KKD & JBLU

CAT – Caterpillar, Inc. – Shares in Caterpillar are down for the third straight day, trading 2.1% lower on Thursday afternoon at $106.68 as of 12:50 p.m. in New York following the release of weaker manufacturing data from Germany and China. Activity in the newly issued weekly options on the machinery maker suggests some traders anticipate the downside move in the shares will continue in the near term. Bearish positions were initiated at the Mar. ’30 $100 strike, where more than 1,000 puts were purchased for an average premium of $0.35 apiece. Traders long the $100 puts profit at expiration next week in the event that CAT’s shares decline another 6.6% to breach the average breakeven price of $99.65. Shares in Caterpillar last traded below $99.65 in mid-January.

KKD – Krispy Kreme Doughnut, Inc. – Options on Krispy Kreme are more active than usual today, with shares in the doughnut retailer down 6.6% at $7.25 this afternoon. More than three times as many call options are changing hands on KKD as put options, but most of the volume appears to be bearish. Front month $7.5 strike calls traded around 1,200 times so far today against open interest of 415 positions. It looks like most of the call options were sold this morning for $0.25 to $0.30 per contract. Perhaps call sellers are throwing in the towel on the possibility for a near-term rebound in shares of the doughnut maker. Alternatively, some of the volume today may be the work of traders cutting their losses on bullish positions initiated yesterday afternoon. Open interest in the April $7.5 strike calls suggests buyers shelled out $0.65 per contract for a couple hundred contracts on Wednesday. These positions more than halved in value overnight.

JBLU – JetBlue Airways Corp. – Shares in the air carrier lost a bit of altitude on Thursday, trading 0.80% lower on the day at $5.09, as of 12:05 p.m. in New York. Trading traffic in JetBlue Airways options suggests some strategists are beefing up on bearish puts. Volume in JBLU options is concentrated in the September expiry where some strategists appear to be positioning for shares in the airline to potentially extend losses during the next six months. Traders exchanged more than 4,200 puts at the Sept. $5.0 strike against open interest of 1,329 contracts. It looks like most of the puts were purchased for an average premium of $0.63 apiece, thus preparing buyers of the options to profit should JetBlue’s shares fall another 14.0% to breach the average breakeven price of $4.37.


Caitlin Duffy

Equity Options Analyst

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