Avis Budget Group (CAR) stock spiked to $235 on heavy call buying and short squeeze dynamics with a thin 13.05 million share float, though the stock faces fundamental headwinds.

Hertz (HTZ) stock climbed to $5.70 on bullish options flow and Bill Ackman’s activist stake, benefiting from improving fundamentals including a narrowed $747M full-year net loss versus $2.86B in 2024 and 44% year-over-year depreciation improvement.

Options-driven momentum and short squeeze mechanics are propelling both rental car stocks higher, with traders betting on continued upside despite significant analyst skepticism and debt burdens that could reverse gains quickly.

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Avis Budget Group (NASDAQ:CAR) stock is up 10% today, moving from $212.60 to $235 in midday trading on Tuesday. It's pure momentum, fueled by heavy call buying and intensifying short squeeze chatter across the rental car sector.

Hertz (NASDAQ:HTZ) stock is along for the ride, up 8% today and climbing from $5.31 to $5.70. Both names are benefiting from the same options-driven dynamic, and traders are watching both closely as volume surges through the session.

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These two have moved in tandem before. They're direct sector peers, both carry massive debt loads, and both have high short interest that makes them natural targets when bullish options flow starts building. That's exactly the setup playing out right now.

Avis Budget Group's short squeeze story has been building for weeks. The stock was up 118% over the past month heading into today's session. That kind of run doesn't happen without a feedback loop, and that loop is now in full effect.

Here are the mechanics behind the move. Heavy call buying forces market makers to hedge by purchasing shares, which pushes the price higher, which draws in more momentum traders, which forces more hedging. The momentum itself is pulling in traders who don't want to miss the next leg.

Shares outstanding for CAR stock sit at just 35.26 million, with a float of only 13.05 million shares. That's a thin float. When institutional positioning and short interest collide with aggressive call buying in a stock this tightly held, the price can move violently in either direction.

Granted, the fundamental picture is complicated. Avis Budget Group reported a Q4 FY2025 EPS of -$21.25, a deep miss versus the -$0.23 estimate, weighed down by a $518 million EV impairment charge. The company carries $6.1 billion in corporate debt and negative shareholders' equity of -$3.129 billion. The analyst consensus target for Avis stock sits at $106.43, well below today's price. That's the tension traders are betting on right now.

Investors are sharply divided: some are targeting Avis Budget Group stock for major upside based on historical squeeze patterns, while others anticipate a sharp correction due to broader sector headwinds. That disagreement is exactly what keeps a squeeze alive. The bulls need the bears to keep buying shares to cover.

Hertz's story has a different flavor. Pershing Square Capital Management CEO Bill Ackman's active stake has given HTZ stock a turnaround narrative that attracts a different kind of speculative buyer. Investors are watching critical resistance levels near $6 as a potential breakout level, and today's move is bringing that level into view.

The options flow is real. Heavy call buying and bullish options flow are fueling HTZ short squeeze speculation, with increased volume supporting the bullish narrative. Furthermore, Hertz stock carries a beta of 2.06, meaning it tends to move hard when sentiment shifts. Today is a textbook example.

There's genuine fundamental progress underneath the noise. Hertz's full-year net loss narrowed to $747 million from $2.86 billion in 2024. Depreciation per unit improved 44% year-over-year to $330 in Q4, and vehicle utilization reached 81% for the full year, up 200 basis points year-over-year. Hertz CEO Gil West's back-to-basics strategy is showing measurable results.

That said, the debt load is sobering. Hertz's total debt sits at approximately $17 billion, and the analyst consensus target is $4.33, below even yesterday's close. Of nine analysts covering HTZ stock, six rate it Hold, one rates it Sell, and two rate it Strong Sell. The Street isn't buying the turnaround yet, which is precisely why short interest remains elevated and why a squeeze can develop.

Short squeeze dynamics can reverse without warning. Stocks driven by options flow and squeeze mechanics, rather than fundamental catalysts, can give back gains just as quickly as they accumulate them. Momentum is a powerful force until it isn't.

For CAR stock, watch for whether the stock can hold above $230 into the close. As for HTZ stock, the key level is $6, which traders have flagged as a potential breakout trigger. A rally above those levels would signal that the squeeze has more room to run; a fade from here would suggest that today's momentum has exhausted itself.

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