Let's start with the action on Carvana back at the start of the week. Here is it's mid afternoon chart on Monday. The stock is up $23.00 on the day! When I see stocks move up like this I sometimes wonder why there isn't more profit taking at the end of the trading sessions. .
Now let's jump forward to Wednesday afternoon with tomorrow being a holiday. Carvana is up. How much? Well about $28.00 more dollars in two days!
The word on the street is that their main competitor "Carmax" is in trouble. Here it how it has traded in the last thirty days. It had a bit of a dip but seems to be coming back. Avis Budget Group, also shown below the same thing.
Hertz in the last three months has also struggled in price.
So back now to Carvana. It's on fire this week. Buying Puts now that expire on Friday would be kind of dumb. The markets will be closed on Thursday. That plus the market will be closing at 1:00 p.m. on Friday. Yet then again the stock could drop $25.00 in one day. Now here is a wildcard factor. The market is gearing down for a four day weekend starting after the close today (tomorrow is Thanksgiving). Yes the market will be open only on Friday (once again only until 1:00.p.m.) so the trading volumes will be a tad on the light side. A tad on the light side also means that there will be less of a chance of a sell off. Look at how inexpensive these Puts are at 2:20 p.m. Wednesday afternoon.
Some traders, not many are dabbling in these Puts. If you check back to my Caravan blog of November 19th you will see mention of a one day price swing of $.26 to $5.45 in one series of its options. Option traders know how explosive this stock can be. So what to do? Just wait until Friday and then decide if you want to jump into the action. Holding onto overnight positions with one day to go is an expensive proposition. The fear once again is that with the four day holiday the markets will just wither away on a shortened Friday trading session with no real urgency to do anything.** It's now Friday. The Puts we are watching ended up crashing 72% in the first fifteen minutes of trading. Carvana opened on the upside.
Now this a few minutes later. These same Puts are down even more.
So now it's 10:00 a.m.. It's time to look at the situation with fresh eyes. The stock is up $10.00 in the first thirty minutes of trading. Only one contract traded on the 367.50 Puts, the Puts now most likely to benefit from a downward move.
If the stock was going to reverse in direction here is how the Puts five dollars "out-of-the-money" are trading. Some traders are programmed to buy five dollar "out-of-the-money" Puts after a stock has rallied ten dollars on a friday morning.
Here is it's one day and five day charts.
Now this.
The Puts are not really attracting attention. This time we are looking at a series higher in price with all of the other series we looked at now irrelevant. The D.J.I.A. remains strong. At some point in time one has to give up on thinking about playing the downside.
Notice the 581 figure in the volume of trading on the "somewhat-out-of-the-money" Puts. Another squeeze on the short postions. Carvana continues to rise. This time it is fifteen minutes later.
Look at how the 360 Calls are doing on the day.
Now it's noon.
Look at how this one series of Calls is trading in the 11:30-12:00 time period. What a ride they have had. Why wasn't I focused on this sooner?
Now look at these Puts which expire in less than one hour.
Would this finally be an opportunity to get in? These options have less than one hours trading life left in them. Here is how these Puts ended up closing the day.
Here also is how the stock closed the day.
Look at how these Calls closed the day.
All of the Puts series we were looking at got wiped out. The strategy of buying Puts on a stock which rallied $10.00 on a Friday opening would have failed. Folks, Caravana's stock is widely recognized as being manipulated. Tens of articles are written about this. To catch them at their games you have to catch them during periods of intraday market reversals. Otherwise stay away. (My November 19th "mid-week" blog talked about exactly kind of achart fornmation). Carvana was up $64.62 on the week.
Comments