DTG – Dollar Thrifty Automotive Group, Inc. – A put butterfly spread, purchased on Dollar Thrifty within the first half hour of the trading session, is identical to one initiated on Friday afternoon. Perhaps the same investor is beefing up on the bearish position ahead of DTG’s September 16 meeting in which the firm’s shareholders are scheduled to vote on the proposed buyout of the company by Hertz Global Holdings. Today’s transaction could otherwise be the work of a like-minded investor hedging the possibility the deal may fall through for some reason. Dollar Thrifty’s shares are currently up 0.2% to stand at $48.25 as of 12:40 pm ET. The put butterfly spreader picked up 5,000 in-the-money puts at the October $50 strike for an average premium of $4.00 each [wing 1], sold 10,000 puts at the October $45 strike at a premium of $1.60 apiece [body], and purchased 5,000 puts at the October $40 strike at a premium of $0.65 a-pop [wing 2]. Net premium paid to enact the spread amounts to $1.45 per contract. Thus, the responsible party is poised to profit should DTG’s shares trade below the effective breakeven price of $48.55 by expiration day in October. Maximum available profits of $3.55 per contract pad the trader’s wallet if the car rental company’s shares fall 6.7% from the current price of $48.25 to settle at $45.00 at expiration. DTG’s overall reading of options implied volatility is up 6.7% at 36.06% as of 12:45 pm ET.
Affiliation: Interactive Brokers
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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