Hertz Global is down on accounting worries, and now traders are
using options to manage their risk in the name.
optionMONSTER's Heat Seeker monitoring program shows a flurry of
call buying in the name today, starting early with the August 30s.
More than 17,000 of those traded in the first 30 minutes of today's
session, dwarfing previous open interest of 4,174 contracts. The
biggest blocks fetched $1.
have locked in the price where the car-rental stock can be
purchased through expiration in mid-August, letting traders
position for a move higher with limited risk. That way they don't
have to worry about exiting if more bad news emerges, though those
contracts will lose value if shares remain below $30. (See our
HTZ is up 4.51 percent to $28.25 in afternoon trading. It's trying
to rebound from a sharp selloff earlier this month when the company
said it would restate three years of financial results to fix
errors that started in 2011. Management warned the project will
Nonetheless, the shares held the same $26 level that's been the
midpoint of their trading range for the last year. They're also
posting higher lows along their 200-day moving average, which could
make some chart watchers think its longer-term uptrend remains
In addition to the activity in August, several other contracts are
active. The Heat Seeker showed 6,800 of the July 28 calls bought,
mostly for $1 to $1.70, along with 5,200 June 28s for $0.40 to
$0.50. There was also a bullish combination trade in December, with
the 25 puts sold and the 30 calls bought for a net cost of $0.70.
That position will profit from a rally and suffer potentially huge
losses if the stock falls.
Total option volume is quadruple the daily average so far today,
with calls outnumbering puts by a bullish 5-to-1 ratio.