URI Call Traders Score Big Gains in 5 Days
Plus, relatively low volatility expectations were being priced into short-term URI options
by Emma Duncan
Published on Nov 7, 2019 at 1:11 PM
URI had been an attractive target for premium buyers over the past year
Subscribers to Schaeffer's Weekly Options Countdown service just scored a nice profit on the United Rentals, Inc. (NYSE:URI) weekly 11/1 132-strike call. Below, we'll explain why we expected a big surge from URI, and how the winning trade unfolded in just one week.
At the time of our initial recommendation on Sunday, Oct. 27, URI had moved just moved higher post-earnings, even after the company narrowed its full-year guidance and lowered its EBITDA projections, hinting at excessive pessimism surrounding the stock. The shares --- which were up 32% year-to-date -- had just taken out resistance at the $130 level, which had the possibility to act as support going forward, and the week prior, formed a bullish engulfing candle.
Options were also attractively priced at the moment. URI's Schaeffer's Volatility Index (SVI) of 32% ranked lower than 91% of similar readings in the past year, suggesting relatively low volatility expectations were being priced into short-term options.
Additionally, the equity had been an attractive target for premium buyers over the last 12 months. This was per its elevated Schaeffer's Volatility Scorecard (SVS) reading of 100.
We entered the position on Monday, Oct. 28, with URI trading around the $135 mark. The stock continued higher, rallying alongside the broader equities market on upbeat U.S.-China trade headlines. On Friday, Nov. 1, the security gapped as much as 6.3% higher in intraday trading, allowing subscribers to close out of their positions and lock in a 105% profit in just five days.