United Rentals Stock Set Up For Extended Gains

United Rentals, Inc. (URI) call options are attractive, especially with the shares showing no signs of slowing down

Feb 23, 2017 at 8:39 AM
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United Rentals, Inc. (NYSE:URI) is in the desirable situation of trading just off its all-time high, while consolidating into its rising 20-day moving average after advancing over 150% in the past 12 months. What's more, shares of the rental company are approaching a period of seasonal strength. Since inception, the stock has averaged a 5% gain in March and 8% in April.

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URI stands to benefit from options-related support, too. Options traders, in general, have been surprisingly put-skewed, per the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.85 -- outstripping two-thirds of readings from the past year. More specifically, heavy open interest at the newly front-month March 125 put could serve as a foothold in coming weeks.

Upgrades and short-covering activity could also be a boon to the shares. Three-quarters of analysts maintain "hold" opinions on URI. Plus, over 9% of the stock's float is dedicated to short interest.

It's a very good time to buy short-term options on the shares, as well. URI's Schaeffer's Volatility Index (SVI) of 29% rests in the low 5th annual percentile, suggesting front-month contracts can be had on the cheap. Likewise, the stock's Schaeffer's Volatility Scorecard (SVS) of 91 indicates the options market has tended to underprice URI's ability to make outsized moves in the past year.

Last of all, our recommended call option sports a leverage ratio of 5.9, and will double in value on a 16.7% gain in the underlying stock.

Subscribers to Schaeffer's Weekend Series service received this URI commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Series is one of our most popular trading services.
 

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