Rebecca Engmann Darst co-authored this article.
(CAT) – Shares in Caterpillar, the iconic maker of steam-shovels and bulldozers, hammered 4.3% higher to $75.74 today after the company surprised with the market with a lift in its 2010 sales forecast. Caterpillar CEO Jim Owens said the company stood to profit handsomely from the construction expansion projects in the emerging markets as well as infrastructure upgrades in North America and Europe. The gain in share price elicited a 100% gain in call volume for Caterpillar this morning. What’s interesting to note here is the gradual upward spike in implied volatility over the month of March and how it remained unchanged after today’s positive news announcement. Since the start of the month, implied volatility in all Caterpillar options has gapped 30% higher, remaining steady at 32.5% today even after the amended sales forecast. This shows about a 14% risk premium to Caterpillar shares over the next month, and may explain the brisk trading in March 75 puts, as well as calls at the 75 and 80 strikes, that could suggest volatility trades on the rise today.