One investor is positioning for downside in Carmax as the
shares stall at long-term resistance.
optionMONSTER's Depth Charge tracking program detected the
purchase of 2,110 July 30 puts for $0.85 and the sale of an equal
number of July 25 puts for $0.23. Volume was more than quadruple
open interest in both strikes.
The trade cost $0.62 and will earn a maximum profit of 706
percent if the automobile retailer closes at or below $25 on
expiration. It's known as a bearish put spread because it
leverages a move between two prices. See our
KMX rose 0.14 percent to $35.03 in late morning trading. The
stock is up 14 percent in the last month, and is now attempting
to break the same $34-35 range that's been resistance since March
2011. Its recent earnings reports have been mixed, but
investors have favored the stock amid hopes of stronger consumer
spending as the economy improves.
Today's downside strategy could be an outright bearish trade or a
hedge on a long position in the shares. The next earnings report
comes out before the bell Thursday, April 5.
Overall options volume in KMX is 6 times greater than average so
far today, with puts outnumbering calls by more than 50 to 1.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.
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