Caterpillar has had an extraordinary run. But according to some options traders, the good times may be coming to an end.
“Caterpillar is tied to one story, and that’s China," said Options Action contributor and Cantor Fitzgerald's Mike Khouw. "Any cracks start to emerge, that could be a problem for them.”
Caterpillar's stock has piggybacked on the extraordinary run in commodity prices. Since 2009, the stock has gained over 300%, trouncing the S&P 500 over that time. It’s also been making acquisitions, most recently buying Bucyrus International , one of the biggest deals in the mining and construction industry in the past 5 years.
But the stock could victim of its own success.
As Khouw points out, investors have little appetite for any whiff of disappointment. “The richer the name, the more susceptible it is to a fall,” Khouw said. “In a rising market it’s going to do well, but it has got a lot of risk."
And options trader appear to share the cautious sentiment. Open interest for puts on the name outnumber call by a three-to-two margin .
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