Carvana Options for Earnings Today

Alright MTR readers, let’s take a look at Carvana who reports after the close here shortly. Here is the current chart:

The low on Jan 3rd was $175.42 and the recent high was $292.84 for a low to high run in just over 45 days is 67%. Quite impressive as they restructured debt and no doubt forced short sellers to cover, now comes the big earnings test. Here is a pic of their earnings history (all data from Fintel)

Here are their earnings data from the last 3 years:

Source: FinTel

As far as today’s earnings estimates, Revenue Exp. $3.36Bn and an EPS of $0.27. When we look at this run and the current price for perfection, we can’t help but look at put structures. The at the money (ATM) straddles (being long both the put and the call) is priced right around $38.50 when using this Friday’s expiration $285 strike. So the break-evens looking for a move of 13.5% a little bit lower than yesterday. So a potential move above $323 or below $246.5. This is a lot of expected vol here and considering the run up, let’s take a look at the $260/$240 Put Spread. This is a spread by which your risk is what you pay and in this case, its right around $4.55. ($8.52-$3.97).

Considering max profit is $20 bucks or handles as we call them in the industry ($260-$240), this translates into a nice 4.39x payoff structure. Given the implied volatility this seems like a nice trade off and your actual breakeven should Carvana disappoint is a stock price of $255.45 by Friday’s close. ($260-$4.55):

Source:Barchart

Ok so that is what we are looking at today. As far as the other markets we follow NY Traders took the overnight highs in the SP500 futures straight down pre NY open then based out around the 6130 area and have climbed higher ever since. Seems like decent resistance here at 6158 and will be the next stop out level for weak shorts:

Source: StoneX

Ok we will comment on the FOMC Minutes and other items in our next daily post to our subs, for now, FOMC pretty much in wait and see mode. (Data Dependent as usual). Anyway, we hope you received our message well today, we hope you hit that subscribe button and we hope you can at least share our work so that others can enjoy the insight that MTR provides. Till next time, cheers!

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