Kevin Kelly Keeps Bearish View On Caterpillar

On January 12, Kevin Kelly of Recon Capital Partners suggested that traders should purchase a put spread in Caterpillar Inc. CAT. Since then the stock rallied and he lost the premium that he paid for the put spread.

Kelly is still bearish on the stock and he said on Bloomberg Markets that traders should take another shot at Caterpillar. He thinks that it would be a good idea to buy the August 70 put and sell the August 57.5 put for a net premium of $3.60.

The trade breaks even at $66.40 or 8.33 percent lower than the current price. If the stock drops 20 percent to $57.5, he can make the maximal profit of $8.90.