Weekend Trader Alert
December 25, 2022
Open Positions Update
- Close the Skyworks (SWKS) February 17, 2023, 92.50-strike call on Tuesday, December 27. Close the position at a limit price within the range of the current market price when you place the order.
The following is this week's recommendation:Caterpillar (CAT)Place a limit order to buy the Caterpillar (CAT) February 17, 2023 230-strike call at a limit price within range of the current market asked price when you place your order. At the close on Friday, December 23, this option was offered at $18.40. CAT closed at $239.87 on Friday, December 23.Do not attempt to enter this position after Tuesday's close.Please use the following guidelines to manage the position:- Exit the position if the option is at a 100% gain from your entry price.
- If the option has not reached its target profit by 3:00 p.m. Eastern time on Monday, January 23, close the position.
- If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
Shares of Caterpillar (CAT) experienced a pennant breakout on the charts, as well as a successful retest and hold during the market volatility, both of which point toward relative strength. The equity is also holding above its 20-day moving average following a post-earnings consolidation, with the +10% year-to-date level acting as support.
There's plenty of room for upgrades, too, should any optimistic economic news roll in, with analysts begin pricing in a recession in early 2023. More specifically, 18 of 30 covering brokerages rate CAT a "hold" or worse.
An unwinding of pessimism in the options pits could create additional tailwinds. Data from the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the equity's 50-day put/call volume ratio of 2.09 ranks higher than all other annual readings. Multiple bull runs have started when this ratio was above 2.
Caterpillar stock's Schaeffer's Volatility Index (SVI) of 29% sits in the relatively low 32nd percentile of its 12-month range, indicating implying options are reasonably priced at the moment. Our recommended February 230 call has a leverage ratio of 8.5, and will double on an 11.3% rise in the underlying shares.
Most Recent Recommendations The information contained herein is intended solely for the individual subscribers, is not intended for institutional investment organizations, and is not legal to be rebroadcast. Please click here for full disclaimer details.
Limitation on Schaeffer's Investment Research (SIR) liability: SIR liability, whether in contract, tort, negligence, or otherwise, shall be limited in the aggregate to direct and actual damages not to exceed the fees received by SIR from Subscriber. SIR will not be liable for consequential, incidental, punitive, special, exemplary or indirect damages resulting directly or indirectly from the use of or reliance upon any material provided by SIR. Without limitation, SIR shall not be responsible or liable for any loss or damages related to, either directly or indirectly, (1) any decline in market value or loss of any investment; (2) a subscriber's inability to use or any delay in accessing SIR website or any other source of material provided by SIR; (3) any absence of material on SIR website; (4) SIR failure to deliver or delay in delivering any material or (5) any kind of error in transmission of material. SIR and Subscriber acknowledge that, without limitation, the above-enumerated conditions cannot be the probable result of any breach of any agreement between SIR and Subscriber.