$KMX put buyers drive off with profits

Shares of CarMax, Inc (KMX) are falling today, delivering big gains to downside option positions.

On Dec. 16Market 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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