Used vehicle dealership Carvana (CVNA) is up a massive 450% over the past year. One trader sees shares soaring even higher in the months ahead.
That’s based on the May $360 calls. With 85 days until expiration, 17,362 contracts traded compared to a prior open interest of 106, for a massive 164-fold rise in volume on the trade. The buyer of the calls paid $15.50 to make the bullish bet.
Carvana shares recently traded at $285, so shares would need to rise by $75, or about 26%, for the options to move in-the-money.
Carvana just hit a new 52-week high, but still remains below its all-time high of nearly $380, set in the summer of 2021.
Despite being one of the best-performing stocks of 2024, Carvana had a mixed year. Revenue jumped 32%, but overall earnings growth fell by 89%. Carvana did manage to earn an overall profit, but shares are expensive at 142 times forward earnings.
Action to take: Carvana has been a momentum play since late 2023, and have recovered quickly from a recent pullback. Momentum investors may like shares here for more upside in the coming months.
For traders, the May $360 calls are aggressive. But if shares make a parabolic move from here, the option could see high double-digit-returns on a move higher. Traders may want to take quick profits on any large positive day for shares.
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.
