Unusual Option Activity: Carvana (CVNA)

Used car e-commerce firm Carvana (CVNA) is up nearly 400 percent over the past year. One trader is betting on a further rally ahead.

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  • That’s based on the May $45 calls. With 87 days until expiration, 21,757 contracts traded compared to a prior open interest of 296, for a 74-fold rise in volume on the trade. The buyer of the calls paid $18.37 to make the bullish bet.

    Carvana recently traded for just under $58, meaning the options are nearly $13 in-the-money already. Shares have a 52-week high of $62.59, set back in December.

    The company is still struggling operationally, despite the surge higher in shares over the past year. Revenues dropped by 18 percent, and Carvana has yet to turn a profit.

    Even with that operational headwind, shares clearly have some momentum higher right now.

  • Special: $1,300 into $45,000 in just 4 MONTHS?!
  • Action to take: Momentum investors may want to buy a small stake here, and use down days to add to that position. Shares could potentially retest their old highs in a few weeks.

    For traders, the May $45 calls are well positioned for a further rally higher. And if shares flatline, the option won’t lose all its value. More aggressive traders may want to use a higher strike price to take advantage of any further rally.


    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.

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