Alert: Adjustment – CAT Part 1 – close call spread

Ticker: CAT
Price: $210.57
Date: 4/27/23 12:55 pm
Underlying: Caterpillar

Master Portfolio Contracts: 10

Notes: We are closing out of our credit spread.

If there’s any proof that the market is irrational, CAT is the perfect example today. They beat earnings by over a dollar, guidance was lower, and the market sold it off by over $9 at the open. At the time we are typing this update it is down $5. The three of us have been debating whether to just close it and move on but that is a very large loss, close to $9000 for most of us. We have a core position available to work against. Cat has good premiums. We decided that it’s better to adjust and at least try to work the loss down to a much lower level.


This is going to be a three part trade but we are breaking it down into separate alerts. We are first going to close the cat call spread which we made about $1000 on. Step two we will roll the existing short put which may require very little credit to a slight debit. Right now, the market is showing about 5 cent debit to a 5 cent credit. We will then add another leg to the core trade at the 210 level as it seems to have found support there and has been a long-term support level. And then to bring in additional cash we will sell another call credit spread up above the market just to bring in another $1000. Total we will be putting out a debit for this of around 2.50, but at least gives us a chance to try to recover the trade.


Trade Detail:

BTC the CAT 28 APR 225 call
STC the CAT 28 APR 230 call

Debit of around 0.05 to close the position 

Position After Trade Detail:

-10 CAT 28-APR 235 put
+10 CAT 16-JUN 230 put