Hertz Global Stock Flashes Historic Sell Signal

However, HTZ stock options are attractively priced at the moment

Managing Editor
Jul 11, 2018 at 1:14 PM
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Car rental name Hertz Global Holdings Inc (NYSE:HTZ) is selling off today, last seen 3.6% lower at $14.90. This just echoes a broader trend for Hertz stock, which has been unable to stabilize since its mid-October annual peak. And while the stock is currently holding above the $14 mark -- which served as a floor in early June -- a recent rejection at a key moving average suggests bigger losses could be in store.

Based on historical returns from Schaeffer's Senior Quantitative Analyst Rocky White, the security's latest rally up to its 40-day trendline could be a viable sell signal for short-term bears. Looking back over the past three years, there have been five prior instances of HTZ trading within one standard deviation of its 40-day moving average after a lengthy stretch of time spent below it (defined as 60% of the time over the preceding two months, and at least eight of the previous 10 trading days), resulting in an average one-month loss of 13.55%. 

Daily Chart of HTZ with 40MA

Digging into options, HTZ's Schaeffer's put/call open interest ratio (SOIR) comes in at  0.61, which ranks in the 12th percentile of its annual range. In other words, traders are more call-heavy than usual among options set to expire in three months or less. More specifically, the July 21 call is home to peak front-month open interest position of 16,772 contracts, and data from the major options exchanges confirms buy-to-open activity.

Given the deep out-of-the-money nature of this call, it's possible shorts are initiating options hedges against any upside risk. Despite dropping of 8.4% during the most recent reporting period, short interest represents more than 61% of the stock's total available float.

Regardless, those currently looking to buy premium on the equity are in luck. The car rental concern's Schaeffer's Volatility Index (SVI) of 63% registers in the 17th percentile of its annual range. In other words, near-term options are pricing in extremely low volatility expectations at the moment.

 

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