Hertz puts soar after earnings miss

Bearish positions opened in Hertz months ago are proving that they were worth the wait.

On March 21, Investitute’s tracking systems identified the purchase of 3,100 May $20 puts for $1.14 to $1.59 with shares at $20.18. These were clearly new positions, as open interest in the strike was a mere 10 contracts before that session began.

Today those puts traded up to $7.85, more than quadruple their purchase price. Although shares plunged a whopping 39.5 percent in the same period, that move still pales in comparison to the leverage provided by 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.

HTZ dropped 14.09 percent today to close at $12.80. This morning the car-rental company gapped down from the $15 level after posting a first-quarter loss yesterday evening that was wider than analysts had anticipated.

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