Unusual Options Activity: Carvana (CVNA)

Shares of vehicle resale platform Carvana (CVNA) are down over 91 percent in the past year. One trader sees a rebound ahead for the stock in the next 18 months.

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  • That’s based on the January 2024 $60 calls. With 577 days until expiration, 10,283 contracts traded compared to a prior open interest of 130, for a 95-fold surge in volume on the trade. The buyer of the calls paid $5.70 to get into the trade.

    Shares recently traded around $24, so they would need to rally about 150 percent from their current price for these options to move in-the-money. The strike price would still be well under the price peak for the stock at nearly $377 per share.

    The company is still in its early stages. Revenue rose 56 percent last year, but the company is not yet profitable. At its current valuation, the company also has about 3 times as much debt as equity.

    Action to take: As a heavily beaten-down stock, shares could outperform on a market rebound. However, buyers should consider it a speculation, and wait until the market is showing clear signs of an uptrend before buying.

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  • For traders, the January 2024 calls will expire well past the current market fears. That makes them a potential rebound buy, however they may get a bit cheaper in the weeks ahead.


    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 of the companies mentioned in this article.