Hertz Options Buyers Most Bearish In a Year

Despite an investment by Carl Icahn, Hertz Global Holdings, Inc. (HTZ) is lower today, and options buyers expect more downside for the stock

Feb 16, 2017 at 1:04 PM
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Activist investor Carl Icahn recently upped his stake in Hertz Global Holdings, Inc. (NYSE:HTZ), more than doubling his shares from 12.9 million to 29.3 million, with Icahn's holdings now valued at $616 million. This latest play by the activist investor -- who in late 2016 was rumored to be mulling an attempt to take HTZ private -- sent the shares soaring 7.2% yesterday. In fact, HTZ notched a close above its 50-day moving average for the first time since September -- typically a strong "buy" signal for stocks. However, recent options buyers are betting on a steeper slide for HTZ, and looking at the whole picture, would-be bulls may want to cool their engines before following Icahn's lead.

So far today, HTZ is following sector peer Avis Budget Group Inc. (NASDAQ:CAR) lower after CAR delivered disappointing earnings and guidance. HTZ shares are back under their 50-day moving average, shedding 5.8% to trade at $21.26. Longer term, the shares are down more than 59% since their late-July peak, and while short interest fell 13.8% over the last reporting period, the stock hasn't been able to capitalize on these vanishing bearish bets, hinting at an underlying weakness.

Hertz Global Holdings Inc HTZ daily price action

Options Players Look For Steeper Slide

Sentiment in the options pits seems to paint a similarly glum picture. HTZ's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is at an annual high, showing 10.67 puts bought to open for every call over the last two weeks of trading. As such, HTZ's Schaeffer's put/call open interest ratio (SOIR) of 1.51 also sits at its highest point in the last 12 months.

Due to rising volatility expectations ahead of earnings later this month, HTZ's 30-day at-the-money (ATM) implied volatility (IV) of 70% sits higher than 95% of all other readings from the past year. Drilling down, the February and March 22.50-strike puts have seen the most positions added in the past two weeks, with the March 20 put also popular. Buyers of the puts are expecting HTZ shares to extend their journey into the red in the short term. Perhaps the March put buyers are expecting a negative earnings reaction once again; after all, the shares gapped 22.5% lower the session after Hertz earnings in November.

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