Avis Has Large Option Traders' Attention Following Strong Travel Data
Avis Budget Group Inc. (NASDAQ: CAR) shares are up 58.3% year to date, but five unusually large options trades in the past two days suggests at least one trader may believe Avis isn’t quite out of gas just yet.
On Wednesday morning at around 9:19 a.m., Benzinga Pro subscribers were alerted to a purchase of 5,000 Avis call options at a $40 strike price that expire Aug. 16. The calls were purchased at the ask price of 35 cents and represent a $175,000 bullish bet that Avis shares will trade above $40.35 in a little more than a months’ time.
On Thursday morning at 10:54 a.m., a trader purchased an additional 1,923 of the same call options at the ask price of 40.1 cents. This second trade represented a $77,112 bullish bet on Avis.
At 10:55 a.m., likely the same trader purchased 20,159 Avis $41 call options expiring on Aug. 16 at the ask price of 35 cents. This time, the bullish bet was worth $705,565.
Less than five minutes later, likely the same trader purchased an additional 1,001 of the same call options at the ask price of 39.9 cents. This trade represented an additional $39,939 bullish bet on Avis.
Finally, at 11:48 a.m., a trader sold 1,000 call options with a $36 strike price expiring Aug. 16 at the bid price of $2. This final trade represented a $200,000 bearish bet on Avis.
All together, the large Avis option trades over the past two days represent a net near-term bullish bet worth nearly $800,000.
Even traders who focus exclusively on the stock market watch the options market closely to gain insight into what option traders may be thinking.
Due to the relative complexity of the options market, options traders are generally seen as more sophisticated than the typical stock trader. Large options traders are often institutions or wealthy individuals that may have a unique perspective and/or advance information on a given stock.
Red-Hot Summer Travel Season?
The bullish option trading in Avis may be a sign at least one large option trader sees Avis as a big winner from a strong U.S. summer travel season.
Both Delta Air Lines, Inc. (NYSE: DAL) and American Airlines Group Inc (NASDAQ: AAL) have raised their 2019 profit forecasts in part due to high travel demand. Summer travelers flying to their destinations have limited transportation options once they arrive at their destination, and car rental is one of the most convenient.
Unfortunately, there’s no way to be 100% certain whether the buys are a standalone position or a hedge against a larger stock holding. Given is least one trade in the past two days exceed $800,000 in value, it could represent a bullish hedge on a large short position ahead of Avis earnings expected out on Aug. 8. The potential short seller may see earnings as a sell-the-news event given Avis’ large year-to-date gains.
Avis shares traded around $35.79 at time of publication.
Photo credit: Raysonho @ Open Grid Scheduler, via Wikimedia
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