Using options to buy the recent dip in this used car retail stock

CNBC

20-06-2025

Despite beating earnings estimates and maintaining solid profit margins, Carvana (CVNA) has been under pressure recently, losing more than 9% in the last eight sessions — all on tariff scare headlines. While tariffs are a legitimate concern for many companies, this kind of sharp drop is a textbook example of a knee-jerk reaction — and the market is full of them. As a mean reversion trader, the goal is to identify these overreactions and take the other side when the setup aligns. In this case, I'm using a couple of key technical indicators to spot whether CVNA is setting up for a bounce: RSI (relative strength index): RSI is a flexible indicator that helps identify both trend reversals and continuations. In this case, the signal is pretty clear — RSI reversed course on 6/26 and has been climbing since, suggesting that the recent bearish momentum may be fading. Support/resistance: Support and resistance levels are often simple to spot — and in the chart below, you'll see clear support around the $280 level. What's interesting is that CVNA is starting to bounce right off that zone, reinforcing its significance. MACD (5,13,5): I like to bring the MACD indicator into my analysis from time to time because it's a solid tool for spotting early entry signals. While the standard MACD can lag a bit, I often use a short-term version to catch momentum shifts sooner. A bullish crossover — where the MACD line crosses above the signal line — typically acts as an early signal to consider getting into a trade. In this case, MACD hasn't confirmed the setup just yet, but it's definitely worth keeping an eye on for potential confirmation. The trade setup: CVNA 305-310 bull call spread To take advantage of this mean reversion setup, I'm using a bull call spread — a strategy that allows me to risk as little as $250 per trade and scale up easily by adding more contracts. For instance, using 10 contracts means risking $2,500 for a shot at $2,500 in profit, as long as CVNA closes at or above $310 by expiration — just $3 above its current price. With the stock trading near $307, the trade is built by buying the $305 call and selling the $310 call. It's a simple, defined-risk structure that gives me upside exposure without tying up too much capital. I break down setups like this in detail in my book Mean Reversion Trading , and you can explore tons of real-world examples at tradingextremes.com . Here is my exact trade setup: Buy $305 call, July 18 expiry Sell $310 call, July 18 expiry Cost: $250 Potential Profit: $250 -Nishant Pant Founder: https://tradingextremes.com Author: Mean Reversion Trading Youtube, Twitter: @TheMeanTrader DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.