Trade Alert: Betting Against A Bubble
Plus, bullish bets on an energy name in our top ten, and a space name from our Market Watcher's list.
Betting Against A Bubble
One of today’s trades is bearish, which is unusual for us. Avis Budget Group (CAR 0.00%↑) has become one of the market’s most extreme short squeezes in years, with more than 80% of its float recently reported short and an unusually concentrated shareholder base. That is the kind of setup that can produce a move far beyond what fundamentals justify—and then unwind violently once the squeeze runs out of fuel.
We’ve been looking at past examples of similar parabolic squeezes, and we think we’ve come up with a good way to try to profit when this bubble starts to pop.
When A War Ends But Constraints Linger
Our second trade is on another North American energy company that hit Portfolio Armor’s Top Names. We still believe the conflict with Iran will be resolved sooner rather than later, and President Trump’s announcement yesterday that he’s going to maintain the naval blockade on Iran while extending the ceasefire supports that view. Iran is now under real pressure due to constraints on its oil storage since its exports are being throttled.
At the same time, its possible supply constraints may linger longer than the conflict itself. Today’s Top Names trade reflects that theme, but we’re still structuring it so we can make money with a relatively modest move in the stock while keeping our downside defined.
Space Without Capping The Upside
Our third trade is on a space name from our Market Watchers X list that just triggered our technical screens. Space investment hit a record in the first quarter, driven in part by enthusiasm around a possible SpaceX IPO, and that kind of sentiment can spill over into smaller names in the sector.
In this case, instead of using a structure that caps our upside, we’re using one that keeps it open. If the space trade gets hotter from here, we want room for that name to keep running.
Today’s Special Situation Trade
Short-squeeze implosion theme
