This is an options strategy that allows traders to rent stocks instead of buying them outright. This trade is often used when it involves solid growth companies whose stock prices have already increased significantly recently. United Rentals (URI) is the world’s largest equipment rental company, headquartered in Stamford, Connecticut. It also has one of the most impressive earnings growth stories of the past decade, with adjusted EPS increasing nearly 670% from $4.04 per share in 2013 to $31.05 per share in 2023. did. If this kind of growth is sustainable, it would justify a significantly higher multiple than the market price, but interestingly, URI’s P/E of just over 25x represents a small premium to the S&P 500 and its historical multiples. It is only traded in A recent Deutsche Bank research report said United Rentals “operates in an attractive end market that is benefiting from megaproject tailwinds with multi-year growth prospects.” URI 1Y Mountain United Rentals, 1 Year The only concern for anyone interested in purchasing United Rentals now is whether things are too good to be true. With shares soaring nearly 13% since reporting earnings on January 24th and now up 95% over the past 52 weeks, it’s no wonder investors would be arriving late to the party. Perhaps the company could take a cue from its own business and rent before it buys? The Trade One has a May call that expires after the company’s expected April 26 earnings release. for $730, potentially paying $35 per contract, or just under 5% of the current stock price. He can sell $740 calls with an April 5 expiration date for $7 per contract in much the same way that United Rental customers typically rent and operate equipment. That’s one-fifth of the $35 you would have spent purchasing a longer term contract. Trade example: Buy URI May 17th $730 call Sell URI April 5th $740 call This trade could result in URI trading higher in the short term, but with catalysts such as earnings The bet is that without it, a sudden move is unlikely. The maximum profit on this trade will be achieved if URI’s stock price rises to $740 per share by his April expiry, but unlike simply buying a long-term call outright, the The price will drop slightly in 11 days. It cancels out most of the attenuation. Ideally, he would like to roll out the short call to the next expiration date on or around the April 5th expiration date. Disclosure: (none) The above is subject to our Terms of Use and Privacy Policy. This content is provided for informational purposes only and does not constitute financial, investment, tax, or legal advice or a recommendation to purchase any securities or other financial assets. The content is general in nature and does not reflect your unique personal circumstances. The above may not be appropriate for your particular situation. Before making any financial decisions, you should strongly consider seeking the advice of your own financial or investment advisor. Click here for full disclaimer.
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