Bears take the wheel at Avis Budget

Avis Budget pulled back sharply today, resulting in large returns on downside trades.

On April 28, Investitute’s proprietary programs found that 3,100 June $30 puts were purchased mostly for $2 with shares at $30.82. Open interest in the strike was mere 2 contracts before the session began, showing that this was fresh buying.

Today those puts were listed for $7.60, a gain of nearly 300 percent. The stock dropped some 27 percent in the same period, a large move but one that paled in comparison to that of the options.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.

CAR fell 5.37 percent to $22.38 today. The rental company rallied yesterday after announcing plans to invest heavily in “connected cars,” but shares gave back most of those gains.