OptionsHouse

Options Trading News

September 20, 2016  Tue 7:47 AM CT

KMX: SEE CHART GET CHAIN FIND STRATEGIES

A complex trade is looking for the recent uptrend to continue in CarMax, which reports earnings tomorrow.

optionMONSTER's monitoring system detected the purchase of 2,500 October 57.50 calls for $2.50 and the sale of 2,500 October 62.50 calls for $0.75 yesterday. At the same second, 2,500 October 52.50 puts were sold for $1.05.

The strategy combines a bullish vertical spread with short puts. The call spread is looking for KMX to rally above $57.50 by expiration. The sale of the higher-strike contracts reduces the cost of the long calls but limits potential gains, as the trader will be obligated to sell shares if they rise above $62.50. The sale of the puts further lowers the cost of the spread, but the investor will face an obligation to buy shares if they fall below $52.50. (See our Education section)

KMX rose 0.14 percent to $56.58 yesterday and is up 13 percent in the last three months. The used-car retailert is scheduled to announce quarterly results before the market opens tomorrow.

Overall option volume in the name was 10 times greater than average yesterday.

Share this article with your friends


OptionsHouse

Premium Services

Education & Strategy

Continue to melt up? Think debit call spreads

The U.S. equities market is continuing to melt up. Even though the labor market is stagnant, the Fed keeps hinting that a short term interest rate hike is coming sometime soon.

View more education articles »