Avis Budget Group (CAR) shares experienced extreme volatility, soaring to record highs before plummeting sharply, drawing comparisons to the GameStop saga of five years prior.
Stock Price Volatility and Trading Activity
The stock of Avis Budget Group, trading under the ticker 'CAR,' exhibited dramatic price swings recently. The stock surged from below $100 last month to reach a record high near $850 during early trading on Wednesday, only to reverse course sharply intraday.
By Thursday's trading session, the stock had fallen 38% and continued to drop another 6% in premarket trading, settling around $417 per share.
Options Market and Volatility
Trading activity was marked by significant options volume and elevated implied volatility:
- Options Volume: Over 200,000 contracts traded on Wednesday.
- Implied Volatility: The stock registered an implied volatility of 235%, significantly higher than the 20% seen in the S&P 500.
This high level of volatility fueled market speculation regarding potential changes in broker margin requirements for the stock.
Margin Requirements and Trading Restrictions
Sources indicated that margin requirements did change on April 9th, but not on Tuesday. However, current requirements mandate that traders holding concentrated positions in CAR must post 100% margin, effectively requiring all transactions to be conducted using cash.
Historical Parallels and Trading Volume
This current situation has drawn comparisons to the GameStop experience five years ago, when extreme price swings led several brokerages to impose higher trading fees or even restrict trading altogether.
Furthermore, in the last two days alone, Avis has traded over 10 million shares. Considering there are only 36 million outstanding shares, and a portion is controlled by two major shareholders—Pentwater Capital Management and SRS Investment Management—the trading volume represents a substantial fraction of available shares.
