Bears Take the Wheel at Carmax

Carmax has been rallying for the last two months, but the options paper is bearish.

Our Depth Charge monitoring system detected a January 2013 put spread. The bought 1,700 January 30 puts for $2.30 and sold the same number of the 24 puts for $0.55. The previous open interest was less than 200 at both strikes, so this was a new opening position.

It cost just $1.75, which is at risk if the auto-retail stock remains above $30. The maximum profit of $4.25 occurs on a drop $24 or lower at expiration. This could be a hedge against a long position, but only gives protection down to the lower strike.

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