Past performance does not predict future results. Informational only, not investment advice.
Author believed the stock had run up too far and couldn't sustain further 50% upside, expecting a collapse due to negative profits and negative equity. The trade profited from a short squeeze reversal as the stock collapsed as anticipated.
Management has not sold shares and views the stock as undervalued, having retired 94M of 129M shares historically. Pentwater's 3M share float release will create supply scarcity, and the author expects price appreciation when pressure lifts given strong car rental seasonality and thin float mechanics.
Author made a $60k profit by buying CAR puts with August expiration, betting on downside movement while managing risk through longer-dated options rather than shorter expirations.
The stock's tight float and extreme volatility create gamma-driven rallies when put hedging unwinds. Market makers shorting to hedge put positions will be forced to cover at a loss, flipping the direction and driving the stock higher again.
Author is betting on a decline in CAR stock via put options expiring May 22, implying expectation of negative catalysts such as an equity offering or broader market weakness.
End of results.