Thursday, April 7, 2011

Hertz Global (HTZ) - Vol Pops on Call Trades into Earnings

HTZ is trading $16.11, up small with IV30™ up 9.4%. The LIVEVOL® Pro Summary is below.


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Hertz Global Holdings, Inc. (Hertz Holdings) is a worldwide airport general use car rental brand, operating from approximately 8,500 locations in 146 countries as of December 31, 2010.

The order flow in May (earnings month) is interesting and the corresponding vol jump made it worth a note, today.

The company has traded over 6,000 contracts on total daily average option volume of just 1,882. 0 (zero) puts have traded today -- the flow is just calls. The action is in the May 16 and May 17 kind, where essentially all the order flow is concentrated. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the May 17 calls are mostly opening (compare OI to trade size). The trades today feel long. The May 16 call OI looks to be short, but the trades today feel long (closing) as well (not sure as it printed on ISE with price variation, so it's nearly impossible to tell second hand). With the vol up nearly 10% in May, the circumstantial evidence confirms that the order flow is buying premium. Note that earnings are projected for the May cycle.

The Skew Tab snap (below) illustrates the vols by strike by month.

The skew shape is normal, with a slight bend up to the May 19 calls (nickel bid, but for size).

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

The stock looks to be generally trending up. The jump in the IV30™ today has pushed it to the long-term realized vol average (HV180) and now well above the short-term realized vol (HV20).

Possible Trades to Analyze
I can't find any kinks in the skew or any really interesting vol trades to examine. Paying $0.10 in the May 18/19 call spread seems like an interesting 9:1 MaxGain:MaxLoss bet, but getting those prices will be tough and it's really just a lottery ticket more than a skew trade.

Keeping an eye on this one could be worth the time -- put it in a watchlist in LVP with an IV30™ and stock price alert (both set to be higher). If the flow continues and the stock rises with vol, maybe a skew trade opens up.

This is trade analysis, not a recommendation.

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