Today’s tickers: CAT, CPNO, MCO, MER, XLF, QLGC, CBS, CFC, AMZN, VIX
CAT – Caterpillar Inc. Share prices among today’s most actively traded options activity were pretty well blotted with red ink for much of the session. One of the outperformers was heavy equipment-maker, Caterpillar whose shares slid last week in response to an acknowledgment by the company within its earnings release that there is worse to come from the construction sector next year. However, the company did grow revenues by 8% and converted that into a net income gain of 22%. Its shares still stood 20% higher for the year despite a one day 5.4% decline. That was in response to lower 2007 profit guidance from the company. However, investors are acting in a rather forgiving way today and seeing through a period of weakness for its core market. Caterpillar reiterated its 2010 goals and was keen to point out how it continued to capitalize on key areas outside of the United States where it was succeeding in mining, oil and gas, electric power and marine engine markets. The company’s shares hugely lagged the overall Dow industrials performance since last week’s earnings, yet today marks quite a comeback in the face of a 1% slide in the Dow. Option traders are leaving a clear footprint where they are selling puts and buying calls to position themselves for a continuation in the share price going forward. In the December 75 series, investors paid a premium of 3.6 to establish long positions in the calls while simultaneously writing at-the-money puts for 3.3. The pattern was similar in the November contract where puts at the 72.5 through 80 strikes were largely sold while the calls appear to have been bought.
CPNO – Shares in Texas pipeline company Copano Energy LLC closed .70% lower at $37.04, following news that the company has completed its acquisition of Denver-based Cantera Natural Gas LLC. The acquisition was executed in order to access natural gas pipeline systems in the Powder River Basin of Wyoming. It appears that a trader may have taken advantage of lower call-side premiums to make a fresh bullish bet on Copano’s share price action going into December. Fully 20,000 lots traded in the December 40 calls at a price of $0.35 apiece, implying a return to August price levels by year’s end. Copano’s standing 52-week high of $45 was hit back in May.
MCO - Shares in credit ratings giant Moody’s (MCO) lost 3% to close at $45.93 after its Q3 profits gapped below analyst estimates and the company shrunk year-end guidance on back of continuing credit market weakness. The company has taken flack along with arch-rival Standard & Poor’s for its complicity in giving inflated credit ratings to debt instruments backed by subprime loans. With options trading at nearly 8 times the average volume, traders positioned today for further downside in Moody’s share price – moderate in the front month, and more pronounced into the New Year. This was expressed through put spread activity in the November contract, where traders sold puts at the 45 strike for around $1.65 apiece to defray the cost of buying puts at the 55 mark for $8.90. Action in the January contract showed traders buying puts, with more than 20,000 lots bought at the 40 strike for $1.90. A move below $40 would put Moody’s shares at levels not seen since mid-2005.
