United Rentals is pulling back from a massive rally, and now the bulls are looking for more upside.
optionMONSTER's Heat Seeker tracking system detected the purchase of 2,160 September 27 calls for about $0.85, and the sale of 2,160 September 31 calls for $0.125. Volume was 4 times open interest in both strikes.
This bullish call spread cost $0.725 and will earn a maximum profit of 452 percent if URI closes at or above $31 on expiration. (See our Education section)
The shares surged from about $11 last August to over $34 by early April amid a giant short squeeze. The company is benefiting from a secular trend of more customers renting equipment because they can't get banks to finance purchases.
URI is up 0.96 percent to $23.18 in afternoon trading. The company--which provides a wide range of machinery such as forklifts, giant cement buckets, and blinking-arrow boards for highway construction--has also exploited the strong junk-bond market to refinance its hefty debt.
Its last earnings report on April 19 missed forecasts on the top and bottom lines. Nonetheless, the shares have returned to an old peak from mid-2008, which could make some chart watchers think that it's found support and look for another push to the upside. Short interest is still substantial at about one-quarter of the float.
Overall option volume is 8 times greater than average so far today, with calls outnumbering puts by more than 80 to 1.
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