Puts Popular as Carvana Looks to Repeat Earnings Success

CVNA shares are up almost 150% in 2019

Back in August we saw Carvana Co (NYSE:CVNA) jump 25.1% the day after the company's earnings release. In fact, CVNA shares have been positive after earnings in six straight quarters, something investors should know with the company due to report after the close tomorrow, Nov. 6.

However, options traders have actually been buying puts ahead of the event, with the 10-day put/call volume ratio of 2.67 on the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranking in the 83rd annual percentile. In short, put buying has been more popular than normal. There are almost 5,200 positions at the front-month November 75 put alone, but most of these were opened near the bid price, hinting at potential sell-to-open activity.

In today's trading, put volume is running in the 96th annual percentile, at five times the average intraday clip, and new positions are opening at the November 65 and 78 puts. Most of that action appears attributable to a bear put spread. From a broader view, the options market is pricing in a 19.5% swing for Carvana the day after earnings, regardless of direction.

Outside the options pits, there are plenty of CVNA bears. Despite the shares' 148.5% year-to-date gain, short interest makes up almost 38% of the float, or 11 days' worth of buying power, based on the stock's average daily trading volumes. As such, another earnings win could result in short covering, which would help the stock extend its year-to-date lead of nearly 150%.