Interesting HTZ Put And Call Options For November 14th

The article details options strategies for Hertz Global Holdings Inc. (HTZ), currently trading at $6.72/share, presenting methods for income generation or discounted stock acquisition. Selling a $6.50 strike put for 65 cents offers a potential 84.80% annualized return if it expires worthless (67% probability), or a net acquisition cost of $5.85. Conversely, a covered call strategy using a $7.00 strike call for 80 cents could yield a 16.07% return if called away, or a 100.95% annualized boost if it expires worthless (39% probability). These examples highlight the potential for enhanced returns, notably against HTZ's high implied volatilities (204% for the put, 179% for the call) compared to its 99% historical volatility.

Analysis

The options market for Hertz Global Holdings (HTZ), trading at $6.72, presents strategies for yield generation or discounted stock acquisition, driven by significantly elevated implied volatility. Selling a $6.50 strike put contract for a 65-cent premium offers a path to acquire shares at an effective cost basis of $5.85, a notable discount to the current market price. This strategy also carries a 67% statistical probability of expiring worthless, which would result in a 10.00% return on the cash commitment, or an 84.80% annualized yield. For existing shareholders, a covered call strategy involving the sale of a $7.00 strike call for an 80-cent premium could generate a total return of 16.07% if the stock is called away. If the shares remain below $7.00 at expiration, an event with a 39% probability, the premium provides a 11.90% return boost, or 100.95% annualized. Critically, the implied volatilities of 204% for the put and 179% for the call are substantially higher than the stock's 99% trailing twelve-month historical volatility, indicating that option premiums are rich and the market is pricing in a high degree of uncertainty or a significant future price swing.

Key Decisions for Investors

• Investors bullish on HTZ but seeking a better entry point could consider selling the $6.50 cash-secured put to either acquire the stock at a net cost basis of $5.85 or generate an 84.80% annualized yield.
• Current HTZ shareholders could implement a covered call strategy by selling the $7.00 call to generate substantial income, but must accept capping their upside at a 16.07% total return if the stock is called away.
• The significant premium of implied volatility (179-204%) over historical volatility (99%) suggests that option-selling strategies are currently more advantageous than option-buying, as sellers are being well-compensated for taking on price risk.