Mike Khouw Sees Unusual Options Activity In Caterpillar

Mike Khouw spoke on CNBC's Options Action about a bullish options trade in Caterpillar Inc. CAT. The call options volume in the name was twice the average daily call options volume and the most active options were the October 72.50 calls.

The company is due to report earnings on Thursday and the options market is implying a 4 percent move for the stock, which is the same as its average move on the earnings. Khouw noticed a big activity in the October 72.50 calls and traders were paying around $0.60 for the strike. The breakeven for the trade is at $73.10 or approximately 4 percent higher from the current stock price.