Two bullish trades win in CarMax

CarMax has rallied since its quarterly results a month ago, and bullish positions are paying off.

Investitute’s systems came across two bullish trades opened on consecutive days in April. Both positions generated significant profits before expiring when the market closed yesterday:

–On April 6, 14,179 July $60 calls were purchased for $2.85 as part of a bullish roll with shares at $56.13. The calls traded up to $6.20 yesterday, a gain of nearly 120 percent, while the stock rose 17.8 percent.

–On April 7, 25,522 July 57.50 calls were bought for $3.20 as part of a bullish spread with shares at $55.73. Those contracts traded as high as $8.40, a profit of more than 160 percent, as shares advanced 18.26 percent.

Long calls lock in the price where the stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

KMX rose 2.66 percent to $66.09 yesterday. The used-car retailer, a target of noted short-seller Jim Chanos, surpassed expectations on the top and bottom lines in its quarterly report on June 21.