Options News
Put buyers score as $CAR slows
Bearish option traders tripled their money in Avis Budget Group today after Morgan Stanley resumed coverage of the stock. On June 12, Investitute’s tracking systems found that 2,000 August $38 puts expiring on Aug. 17 were purchased for $1.30 with shares at $42.61. This was clearly fresh buying, as open interest in the strike was only 563 […]
Bearish option traders tripled their money in Avis Budget Group today after Morgan Stanley resumed coverage of the stock.
On June 12, Investitute’s tracking systems found that 2,000 August $38 puts expiring on Aug. 17 were purchased for $1.30 with shares at $42.61. This was clearly fresh buying, as open interest in the strike was only 563 contracts before the trades occurred.
Those puts sold for $4.51 today, more than 3 times their original purchase price. The stock dropped 18.2% at the same time, underscoring how quickly options can far outperform moves in their underlying shares.
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 was down 9.65% today to close at $34.93. The stock declined after Morgan Stanley resumed coverage of the name with a $30 price target and an “underweight” rating, citing headwinds for the U.S. car rental industry as a whole.