Put Traders Pounce as Icahn News Levels Hertz Stock
Hertz Global Holdings Inc (NYSE:HTZ) stock is down 13.5% today at $17.29, after a Securities and Exchange Commission (SEC) filing revealed Carl Icahn cut his stake in the car rental name to 28.91% from 35.27%. This follows yesterday's after-the-close buzz that Morgan Stanley re-offered 5 million HTZ shares for $19.60-$19.65 -- a discount to Monday's close at $19.99.
Today's drop has sparked a rush of activity in Hertz's options pits, with roughly 13,500 puts and 4,300 calls on the tape so far -- 10 times what's typically seen at this point in the day. The March 19 put is most active, though it looks like most of the activity here is tied to stock. Elsewhere, some traders may be buying to open the March 15 puts, betting on a bigger sell-off through front-month expiration at next Friday's close.
Today's accelerated put volume echoes the broader trend seen at the major options exchanges. Specifically, HTZ stock's 10-day put/call volume ratio of 3.01 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the 74th annual percentile, meaning puts have been bought to open over calls at a faster-than-usual pace.
While it's possible that some of this put buying could be a result of shareholders protecting paper profits with an options hedge, skepticism is seen elsewhere on Wall Street. For instance, short interest rose 3.8% in the most recent reporting period to 21 million shares -- more than one-quarter of the stock's total available float. Plus, all five covering analysts maintain a "hold" or "strong sell" rating on HTZ.
Looking at the charts, Hertz Global stock's rally off its late-December lows near $13 peaked at a six-month high of $21.95 on Feb. 26, a familiar ceiling for the shares since last May. And while today's drop has the security pacing for its biggest one-day loss since Oct. 24, it's finding a foothold in the $17.10-$17.30 region, home to its 30-day moving average, a trendline connecting higher lows since Christmas Eve, and last month's pre-bull gap levels.
