Options Bears Blast CarMax Stock Ahead of Earnings

The auto parts stock has taken some nasty post-earnings tumbles over the past couple years

Digital Content Manager
Dec 19, 2022 at 12:47 PM
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As CarMax, Inc (NYSE:KMX) gears up for its third-quarter earnings report, due out before the open on Thursday, Dec. 22, options players are taking note. Bears, specifically, are targeting the stock in droves, with 21,000 puts exchanged, which is 14 times the intraday average. Meanwhile, the 4,296 calls traded so far represent four times what is typically seen at this point. The most popular position by far is the February 2023 55-strike put, where positions are being bought to open, followed distantly by the weekly 12/23 90-strike call, where positions are being sold to open. 

CarMax stock was last seen down 2.7% at $59.78. The stock's two most recent rallies were met with resistance at the 70-day moving average, which has kept a lid on KMX since August. The security is headed back toward its Oct. 21, two-year low of $54.85, and it's shed 54.5% in 2022. 

kmx dec 19

CarMax stock has taken some nasty post-earnings tumbles during the past few years, including a 24.6% drop after its September report, and a 12.6% next-day slide this time last year. During its last eight, only two post-earnings returns have been positive. The stock averaged a next-day move of 10.3%, regardless of direction, while options players are targeting a much greater move of 25% this time around. 

Short sellers continue to target the stock, with short interest up 30% in the last two reporting periods to make up 11.1% of the stock's available float. Meanwhile, analysts are split on the security, with seven saying "buy" or better, and six saying "hold" or worse. 

Sentiment among options players is bearish. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), KMX sports a 50-day put/call volume ratio of 2.22 sits higher than 70% of readings from the past year, meaning puts are quite popular right now. 

 

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