Bulls Want to Drive CarMax Higher

 
 
By David Russell of OptionMonster
 
NEW YORK -- Auto dealers have been a quiet niche in the retail sector, but Monday the bulls looked for CarMax (KMX) to wake up.
 
OptionMonster's monitoring systems detected the purchase of almost 7,000 January 52.50 calls, with the largest block pricing for $1.65. Volume was more than 38 times open interest at the strike, which indicates that new money was put to work on the long side.
 
Some 1,100 December 52.50s calls were also gobbled up, mostly for $1.15, in a new opening trade.
 
These calls lock in the price where a stock can be purchased, letting investors cheaply position for a move higher. The contracts can also generate nice leverage in the event of a rally.
 
CarMax shares rose 2.3% to $51.51 Monday. The used-car retailer had a strong run between mid-2012 and the spring but has been consolidating since. The last earnings report in September beat expectations on the top and bottom lines.
 
Total option volume was 15 times greater than average in the session, with calls outnumbering puts by a bullish 24-to-1 ratio.
 
Russell has no positions in KMX.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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