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Big Hertz pullback brings out the bulls

David Russell (david.russell@optionmonster.com)

This week's pullback is drawing buyers to Hertz Global.

optionMONSTER's Heat Seeker monitoring system detected the purchase of some 5,200 July 24 calls for $0.90 and the sale of a matching number of July 23 puts for $0.70. Volume was more than twice open interest at both strikes, indicating that new positions were initiated.

The trade cost about $0.20 and is similar to buying shares in the car-rental chain. Owning the calls locks in a $24 purchase price, while writing the puts generates income to lower the cost basis. But it also creates an obligation to buy stock for $23 if it falls to that level.

Investors use the strategy when they like a company but don't want to lock up cash buying shares. This way they will profit from a big rally while also having a buy order in place below the current price if it slips. (See our Education section for more on how to manage trades with options.)

HTZ is down 4.52 percent to $23.23 this morning but has appreciated more than 80 percent in the last year. The stock has been following the broader market lower since late May, but today's trader apparently thinks that it's due for a bounce.

Total option volume is triple the daily average so far today, according to the Heat Seeker.

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