Hertz Global Holdings (HTZ) has traded well recently. Hertz is headed in the right direction and its stock has risen by 54 percent from the start of the year. The company’s long-term outlook is bright with the current share price more than double what it was one year ago today.

INSTITUTIONAL HOLDINGS

Glenn Russell Dubin’s HighBridge Capital Management is currently the largest holder of Hertz shares with a volume of 14 million and a total value of just over $229 million. HighBridge is followed by James Dinan’s York Capital Management, who own just under 12 million shares with a total value of $181 million.

While York is still the second largest holder of HTZ, it should be noted that their percentage of holdings has decreased by 11 percent from the previous quarter. Citadel Investment Group’s holdings along with AQR Capital Management’s holdings in HTZ are valued at $129 million and $120 million, respectively, with AQR increasing their holdings by 10 percent from the previous quarter.

BIG PICTURE

Recently, Kenneth Heebner, a well-known stock picker, took an interest in Hertz as the company expanded its base of operations through its acquisition of the Dollar Thrifty Auto Group last year (source: Bloomberg). While there were questions regarding whether or not the deal violated U.S. anti-trust laws, the issue was settled and Hertz has been given FTC approval for their acquisition.

Currently, Hertz is one the largest rental car companies in the world with 10,000 locations in over 150 countries and it is the largest airport car rental brand in America, with reported revenues of $9 billion in 2012, which was an increase of 25 percent from the previous year. With the economy recovering and leisure travel expected to pick up as a consequence, it is only logical that Hertz will report higher earnings in 2013 as its stock continues to rise.

The market on Hertz is bullish right now with share prices rising to their highest levels since 2007 and showing no signs of slowing down. On Monday, a big block trader bought 9,900 HTZ Sep 27 Calls for $1.50 (2.4 times the average daily volume) with the stock at $25.69, implying that this trader expects the stock value to rise above $28.50 by expiration.

BIG PLAYERS

Paper is an institution such as a hedge fund, mutual fund, bank, or big trader. Paper bought 9,900 HTZ Sep 27 Calls for $1.50 (2.4 times usual volume) with the stock at $25.69. Based on the strength of the chart and the fundamental outlook for the company I have chosen to tag along.

MY TRADE

Buy the Sept 27 Calls for $1.50

Risk: $150 Per 1 Lot

Reward: Theoretically Unlimited

Break-even: $28.50

GREEKS OF THIS TRADE

Delta: Long

Gamma: Long

Theta: Short

Vega: Long