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Volatility trader hits road with Hertz

David Russell (david.russell@optionmonster.com)

One big trader expects a bumpy road for Hertz.

optionMONSTER's tracking programs detected the purchase of about 5,750 September 15 puts for $2.20 and an equal number of September 15 calls for $1.60. Volume was more than 4 times open interest in both strikes.

Known as a straddle , the trade cost $3.80 and will make money if the car-rental stock makes a big move higher or lower. It also stands to profit from increased implied volatility , a key component in option prices. The stock's implied volatility increased earlier in the month, only to drop after quarterly results came out on Feb. 22. (See our Education section)

HTZ fell 0.96 percent to $14.41 in late morning trading, and has been hovering between $13.50 and $15 all month. The last financial report beat expectations, but the stock is still attempting to recover from a drop the previous week, when weak earnings and revenue caused rival Avis Budget to gap lower.

Overall option volume in HTZ is more than quadruple the daily average so far today.

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