Business Travel Demand Undergirds Unusual Options Volume for Hertz Global (HTZ)

Back during the initial fallout of the COVID-19 crisis, investors couldn’t run away fast enough from auto rental giant Hertz Global (HTZ). Indeed, its ignominious bankruptcy effectively characterized the devastation of the pandemic toward particularly vulnerable industries such as travel. However, following its implosion, HTZ stock emerged from the doldrums with a new purpose. Combined with shifting fundamental tides, the underlying enterprise looks interesting again.

Notably, while the rest of the equities sector absorbed a soft session on Tuesday due to the release of a stronger-than-expected Consumer Price Index, HTZ stock gained 2.56%. It’s a curious development. Essentially, the latest CPI suggests that while inflation isn’t relentless as it once was, it remains stubbornly high. Therefore, the Federal Reserve will likely be in no mood to loosen its monetary strategy.

Moreover, China’s economic reopening implies much greater economic activity than when it was closed. Of course, accelerated activity should lead to more resource consumption. In turn, this dynamic implies that more dollars will chase after fewer critical commodities, thus possibly spiking the inflation rate. As a result, the Fed may tighten the money supply even more aggressively, catapulting recession fears to the forefront.

If such a domino effect materializes, you’ve got to assume that the narrative would not be positive for the business community. After all, if it’s not inflation and the Fed, the financial headlines tend to scream about layoffs, particularly in the technology sector. Still, HTZ stock trudges onward.

In the year so far, shares gained nearly 28% of equity value, continuing to soar as the rest of the stock market slows down to digest important news and developments. To be sure, it’s not all great news for HTZ stock. In the trailing year, it’s still down nearly 3% below parity.

Still, it’s getting the job done, feeding into increased demand for business travel. And recently, Hertz appears to have caught the eye of options traders.

Unusual Options Volume for HTZ Stock Heavily Favors the Bulls

Upon the ringing of the closing bell on Valentine’s Day, HTZ stock represented one of the highlights in Barchart.com’s screener for unusual stock options volume. This stat shows the difference between the current volume and the average volume over the past month. Usually, traders use this information to determine which stocks may be due for big moves ahead.

In this case, HTZ’s volume level reached 13,416 contracts against an open interest reading of 136,845. Call volume hit 12,301 contracts versus put volume of 1,115. Further, the delta between the trailing-month average total volume versus the prior session volume came out to 95.63%. The implied volatility (IV) rank unusually hit 0%.

Further, Barchart notes that the IV low for HTZ stock was 41.06% on the Feb. 14 session. Almost a year earlier on Feb 22, 2022, HTZ hit its IV high of 89.23%. Prospective investors should note that per Barchart.com’s technical analysis gauge, HTZ ranks as an average 40% buy. As stated earlier, its year-to-date performance helped contribute to rising demand for the security.

Not surprisingly, analyst sentiment demonstrates sustained optimism. Three months ago, Wall Street experts pegged HTZ stock a “moderate buy,” breaking down as four strong buys, one moderate buy and two holds. In the current month, the consensus remains the same. However, a new analyst weighed in with a hold rating.

To be fair, HTZ’s 60-month beta stands at 2.24, reflecting much higher volatility than the benchmark equities index. However, given the extraordinary journey of the underlying enterprise, it’s not terribly shocking.

Desperation May Be Undergirding the Business Travel Spike

Notably, the increased demand expectations for business travel in 2023 represents a strange dichotomy. On one hand, you have massive layoffs in the tech space. On the other, you have a much-stronger-than-expected overall employment framework. How should investors reconcile these seemingly contradictory dynamics?

First, not all segments enjoyed strong tailwinds. For the January jobs report, increases in employment opportunities in the leisure and hospitality sector contributed the most to the outsized performance. Of course, such jobs usually require in-person attendance, which leads to a second point: desperation may be undergirding business travel demand.

With the broader economy still battling uncertainties, people must take a proactive approach with their careers. This means being visible, marketing one’s productivity and volunteering for assignments that might not necessarily be desirable. Frankly, though, workers that are out on business trips and securing critical deals will likely be the last to receive the dreaded pink slip.

Therefore, as risky as HTZ stock might be, the underlying enterprise may be going places. Certainly, options traders appear to think so.

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