Hertz drives huge returns for calls

Bullish option traders posted exponential gains as Hertz spiked higher today.

Back on May 17, Investitute’s proprietary programs found that 3,000 July $12.50 calls bought for $0.45 with shares at $10.31. This was clearly a new position, as open interest in the strike was only 796 contracts before the trade occurred.

Those calls traded up to $2.95 today, a profit of more than 550 percent. The stock soared 47.7 percent in the same period, a huge gain but still far less than the move in the options on a relative basis.

Long calls lock in the price where the stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

HTZ surged 15.75 percent to $15.07 today on positive comments by analysts. The car-rental icon, which has an estimated short interest of nearly 52 percent of the float, has squeezed higher by some 70 percent in last three weeks.