Online car dealership Carvana (CVNA) is up 183% over the past year, soaring well beyond the overall stock market’s return. One trader sees a pullback in the second half of the year.
That’s based on the January 2025 $115 puts. With 178 days until expiration, 19,001 contracts traded compared to a prior open interest of 288, for a 66-fold rise in volume on the trade. The buyer of the puts paid $18.70 to make the bearish bet.
Carvana shares recently traded for about $131, so the stock would need to decline by $16, or about 12%, for the option to move in-the-money.
Carvana has already pulled back slightly since hitting a 52-week high of $147.25 just a few trading sessions ago.
Operationally, Carvana has seen revenues rise by 18% over the last year, but shares have yet to turn a profit.
Action to take: Shares are still in an uptrend overall, even with the recent pullback. But interested investors may be able to get a better price in the coming weeks as the market has started to rotate out of tech.
For traders, the January 2025 $115 puts are somewhat expensive, but could see mid-double-digit returns on a further drop at any point in the next few months.
Traders will likely want to hold a put position from now through October to best play the market’s seasonal weakness.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.