Shares of CarMax, Inc (KMX) are falling today, delivering big gains to downside option positions.
On Dec. 16, Market Rebellion’s Unusual Option Activity Service found that 3,800 Weekly $60 puts, expiring tomorrow, Dec. 23, were bought for $2.00 to $3.10 above the existing open interest of 57 contracts with shares at $63.49.
Those puts have traded up to $6.68 today, over 2 times their purchase prices. The stock declined 15.99% in the same time period, a large move but nowhere near that of its options on a relative basis.
Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.
KMX was last down 6.10% to $55.75.
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