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Quantchabot has detected a promising Bull Put Spread trade opportunity for CATERPILLAR (CAT) for the 22-Jan-2021 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.
CAT was recently trading at $197.15 and has an implied volatility of 30.41% for this period. Based on an analysis of the options available for CAT expiring on 22-Jan-2021, there is a 34.14% likelihood that the underlying will close within the analyzed range of $196.13-$206.40 at expiration. In this scenario, the average linear return for the trade would be 66.07%.
52 week high: CATERPILLAR recently reached a new 52-week high at $197.52. CAT had traded in the range $87.50-$197.37 over the past year.
Trade approach: Reaching a new 52-week high is a bullish indicator, so this trade is designed to be profitable if CAT maintains its current direction and does not revert back to pricing on the bearish side of $197.15 on 22-Jan-2021. If possible, the trade has been padded such that slight movement against the trade would still return a profit.
Upside potential: Using this bullish strategy, the trade would be profitable if CATERPILLAR closes at or above $195.44 on 22-Jan-2021. Based on our risk-neutral analysis, there is a 52.74% likelihood of this return.
Downside risk: As with any options trade, there is a substantial downside risk where you may lose most or all of your investment.
To analyze this trade in depth, please visit the Quantcha Options Search Engine.