Options Trading News

Some investors apparently think that the market is giving up too quickly on United Rentals.

The equipment-rental company's stock tripled between early October and late April amid a steady flow of bullish earnings reports. But it's been getting dumped in the last month as weakness in the broader market causes investors to liquidate winning positions.

Yesterday URI fell 11 percent to $33.89. It has lost more than one-quarter of its value from its all-time high of $47.98 on April 27.

In the largest option trade, an investor purchased 5,000 June 40 calls for $0.90, followed seconds later by the sale of 5,000 June 30 puts at the same price, according to optionMONSTER's systems. Volume was more than 4 times open interest in both contracts. The net cost was zero, excluding commissions.

He or she now stands to make money on the long calls in the event of a rally but will face losses on the short puts if the stock falls and be forced to buy shares if they close below $30. That might be acceptable, however, because it would represent such a steep discount to last month's high. (See our Education section)

Later in the session there was buying in the September 40 calls for $2.75 to $2.80 as other investors also looked for a rebound.

URI has enjoyed a strong secular environment as tight bank lending forces companies to lease machinery rather than financing it directly. (See researchLAB for more)

Overall option volume was 7 times greater than average in yesterday's session.