$CAT daily pick: sell Dec 18 $560 put (buy-side) after the Q3 selloff
$CAT: I'm selling the Dec 18 $560 put on @CaterpillarInc after the post-earnings drop and getting paid to wait.
As of midday ($632.92):
Down 11% in two days, 22% below the 200-day and 41% off the June high
Credit $9.45 for about 1.7% in 49 days (~13% annualized)
Breakeven $550.55, about 13% below today
About 19.5x 2027 EPS estimates
I think this selloff is about expectations and not demand because Q3 sales still grew 17% to a record $20.7B and the backlog hit a record $78.1B.
Worst case I own Caterpillar 13% cheaper and finally learn what a reciprocating engine does.
Not financial advice
Why a put and not shares? The full-year sales outlook stayed at mid to high teens growth and Q4 carries a seasonal dealer inventory cut of about $1.6B. The stock was priced for perfect and the AI data center trade is shaky so it could keep drifting. I'd rather collect $945 and let it come to me under $560.
Don't have $56,000 sitting in cash? Defined-risk version: sell the $560 put and buy the Dec 18 $540 put for about $2.15 credit. Max risk $1,785 and breakeven $557.85. You lose the full $1,785 if it's under $540 on Dec 18.
Bear case: $128M of Q3 profit came from tariff refunds and tariff costs are still running about $2.2B this year. If the data center buildout cools off the 52-week low of $537 is in play and that's below my strike. That's why the strike is 11.5% below today and not at the money.
What I'd watch: power generation sales grew 30% to $3.42B and they're taking large engine orders out to 2029 and turbine orders into 2030. The next report is expected around Feb 4 so this put expires before the print. Street target is about $934 with 31 Buys, 22 Holds and 4 Sells for what it's worth.
Sources: Caterpillar Q3 2026 results release (SEC Ex. 99.1) · Reuters via Globe and Mail: CAT tops profit view, shares sink on unchanged sales forecast · MarketWatch: Caterpillar's stock is sinking · Yahoo/Stocktwits: CAT tumbles despite Q3 beat · Motley Fool: CAT Q3 2026 earnings call transcript · Dow Jones via MarketScreener: CAT sales jump on AI demand but Wall Street wanted more
Not financial advice. For informational and educational purposes only.
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