Buying CVNA put contracts.
Carvana Co. (CVNA) is an e-commerce platform for selling used cars.
The stock moved sharply higher last week after the company reported earnings (or losses to be more precise).
Carvana continues to lose copious amounts of money, but the stock traded higher because some investors were encouraged by future plans that might help the company become profitable more quickly.
This hope seems a little far fetched. And in a market that continues to punish companies that don’t generate a profit, I expect CVNA shares to move back lower.
We’ll buy September put contracts, giving us time for the stock to pull back again — and also giving us some extra time premium which will help our put contracts retain some value even if CVNA moves higher.
Adding a bearish CVNA position helps to balance our overall Spec Model Portfolio which is currently holding more bullish exposure to profit from the current bear market rally.