's impact. But while Fastenal, Cummins and Deere have all racked up double-digit gains so far this year, Caterpillar has lagged dramatically, down more than 7%.
Part of the problem for Caterpillar, which is more exposed to construction, mining and power equipment than the farming-focused Deere, is that "it's really tied to global economic growth," Danielle Shay, director of options at Simpler Trading, told CNBC'sAccording to FactSet, roughly 53% of Deere's business comes from the United States versus about 42% for Caterpillar. Deere's market cap is nearly $60 billion compared with Caterpillar at more than $74 billion.
"Deere has been really stable in their farming segment, and this year, we've seen a rise in gardening due to the pandemic that's really been likened to the victory gardens of World War II," Shay said. "I'm bullish John Deere, and as an options trader, for an earnings report, I love selling put credit spreads directly before that report to capitalize on that [implied volatility] crush and theta decay.
A volatility crush occurs when a stock's implied volatility rises ahead of an earnings event and then sharply declines once the results are released. Theta decay, or the steady decrease of an option's value over time, can speed up as a result. A put credit spread bets on a moderate rise in the price of the underlying stock while mitigating some downside.
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