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Downside play targets United Rental

Chris McKhann (chris.mckhann@optionmonster.com)

As United Rentals pulls back from its session highs, one trader is looking for a near-term drop in shares of the equipment-rental company.

URI trades at $40.15, still up 3.69 percent on the day but well off its best levels of the morning, which saw it $1 higher. These are its best prices since mid-May, when shares came off 52-week highs just shy of $48.

optionMONSTER's systems show that a trader bought 2,160 November 41 puts for $1.75 and, at the same time, sold 4,320 November 37 puts for the bid price of $0.40. The volume at each strike was above open interest, so this is a new ratio spread .

The put spread costs the trader $0.95, which is at risk if shares remain above $41. The maximum gain comes if shares are right around $37 at expiration. Below that, the trader faces assignment and the obligation to buy shares. (See our Education section)

The option volume is closing in on 19,000 contracts, compared to a daily average of 3,900 in the last month. Puts outpace calls by 2 to 1.

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