CAT Options Traders Set Price Swing Boundaries at $560 and $1,248

Caterpillar (CAT) stock is known for its volatility, and options traders have already set boundaries for potential price swings. Over the next ten months, contracts put the band at roughly $560 to $1,248.

This means there's a two-in-three chance of the stock finishing within this range, with about a one-in-six chance of falling below $560 and a similar probability of exceeding the ceiling.

The current price is near $841, which puts the band's floor at 33% under today's value and its ceiling at 49% above. The company's shares have been relatively quiet over the past three months, with a 2.5% decline.

The implied volatility on contracts is 43.3%, compared to the stock's actual volatility of 39.8% over the past year. This gap represents the ordinary premium sellers charge for taking on risk, not a fear-driven market.