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Quantchabot has detected a promising Short Risk Reversal trade opportunity for CARVANA CO (CVNA) for the 25-Feb-2022 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.
CVNA was recently trading at $170.94 and has an implied volatility of 78.38% for this period. Based on an analysis of the options available for CVNA expiring on 25-Feb-2022, there is a 34.14% likelihood that the underlying will close within the analyzed range of $130.52-$170.94 at expiration. In this scenario, the average linear return for the trade would be 38.78%.
52 week low: CARVANA CO recently reached a new 52-week low at $169.26. CVNA had traded in the range $171.81-$376.83 over the past year.
Trade approach: Reaching a new 52-week low is a bearish indicator, so this trade is designed to be profitable if CVNA maintains its current direction and does not revert back to pricing on the bullish side of $170.94 on 25-Feb-2022. If possible, the trade has been padded such that slight movement against the trade would still return a profit.
Upside potential: Using this bearish strategy, the trade would be profitable if CARVANA CO closes at or below $173.85 on 25-Feb-2022. Based on our risk-neutral analysis, there is a 52.49% likelihood of this return.
Downside risk: As with any options trade, there is a substantial downside risk where you may lose most or all of your investment.
To analyze this trade in depth, please visit the Quantcha Options Search Engine.