On investor wants a piece of the action in United Rentals, which has been running like a horse.
optionMONSTER's Heat Seeker monitoring system detected the purchase of 2,440 May 46 calls for $1.35 and the sale of 3,660 May 49 calls for $0.375. Volume was more than twice open interest in both strikes.
The trade cost $0.78 per call contract purchased and will earn a maximum profit of about 285 percent if the stock closes at $49 on expiration. Gains will erode above that level and turn to losses over $55.
URI fell 3.53 percent to $45.03 in afternoon trading, and is up 98 percent in the last six months. The company has benefited from a wave of strong demand for rental machinery after the 2008 credit crunch made it harder for businesses to finance purchases. Its earnings have beaten estimates for the last three quarters. The shares gapped higher following the most recent report on April 17, and have pulled back since then.
Today's option trade is apparently looking for the stock to push modestly higher in the near-term.
The strategy is known as a ratio spread because the number of calls sold was greater than the calls bought by a 3-to-2 proportion. Because they're naked short some calls, they don't want URI to go straight up. See our Education Section for more.
Overall options volume in URI is quadruple the daily average so far today, according to Heat Seeker. Calls outnumber puts by 8 to 1.
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