by infinitelimits00
Ok I’ve seen a lot of posts on Hertz. Here’s the thing. If you know my posts, I’m a huge proponent by saying a stock goes up when “there’s more buyers than sellers.” This is true and applies to a lot of stocks, so you can throw fundamentals, especially in the short term, all out of the window.
However, Hertz is different. Right now, it is indeed going up because there are more buyers than sellers, like with any stock that goes up short term, but the reason it is different is the bankruptcy is actually an event that will cause the stock to go to 0 or near 0 (if you are lucky) regardless of how many buyers or sellers there are.
Think of it like an option. An option’s price, directly related to by its IV, is also controlled by buyers and sellers. However, if at expiration it is OTM, it’s worth 0, no matter how many buyers there might be. That’s because theta takes over and it goes to 0 at expiration.
This is like Hertz. Hertz has an event, when they officially finalize bankruptcy, that will wipe out all equity holders and you can treat this event as an “option expiration for an OTM option.” So in this case, this stock will go to 0, so if you are buying now you are gonna be completely screwed. If you have Hertz, you should sell immediately next week.
Look at the Jan leap options. You’ll notice that almost all of the OTM put options are worth similar to their strike price, so it’s pretty much implying that it’s going to 0 in the future. The 1 strike put didn’t even decrease in value despite the stock going up like almost 100%. The bonds are still basically worth nothing. The only thing propping it up is supply and demand and that won’t matter unlike the other stocks since there’s an event that actually will cause the stock to go to 0.
Now, someone smart here will be like “yea but it can go up in the short term.” Sure it can. But anything can. If you just wanna gamble like that, you should gamble in like an option on one of those highly volatile travel stocks in that case. Because that gamble is strictly more +EV than buying HTZ stock. You can get lucky and maybe get it right one random day, but on average buying HTZ stock is literally the most -EV thing on average you can do right now.
People absolutely should not be buying this stock and you should offload it if you are up on it early next week.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.