Core Insights - The article emphasizes the importance of hedging as a risk management strategy for investors, highlighting that it is essential to manage risk proactively rather than reactively [1][2] - Long puts are presented as a form of insurance against market losses, allowing investors to protect unrealized profits from potential downturns [2][3] Hedging Concept - Hedging is defined as a method to protect unrealized profits from downside risks, akin to insurance for investments [2] - The article notes that while investors hope they never need to use their hedge, having one in place provides peace of mind [2] Long Put Options - A long put option grants the buyer the right to sell an underlying asset at a predetermined strike price before the expiration date, providing downside protection [2][3] - The maximum loss is capped when using a long put, as it allows the investor to sell the stock at the strike price regardless of how much the stock price falls [3] Practical Example - An example is provided where an investor owns 100 shares of Microsoft purchased at $500 per share. Without a hedge, a drop to $450 would result in a $5,000 loss [4] - By purchasing a $490-strike put option, the investor secures the right to sell the shares at $490, thus limiting potential losses [4]

Company Overview - Carmax is the largest used-car retailer in the U.S. and also conducts wholesale vehicle auctions, making it one of the largest in the country [7] - The company reported its Q2 2026 results, with shares declining by 20% following the announcement [7] Financial Performance - Carmax missed both top and bottom-line analyst estimates for the quarter, with revenues of $6.6 billion, which is 6% lower than the previous year and $410 million below Wall Street consensus [8] - The earnings per share were 99 cents, falling short by six cents of analyst expectations [8] - The company experienced a decline in sales each month during the quarter, indicating a weakening trend [9] Market Context - Despite the S&P 500's increase of nearly 13% in 2025, most used-car buyers are financially constrained [10] - U.S. household wealth reached $176.3 trillion at the end of June, but the growth in wealth is likely concentrated among the top 10% of Americans, who may not be the primary customers for used cars [11] Stock Performance - Following the recent decline, Carmax's market value has decreased by 44% in 2025, now standing at $6.84 billion, a level not seen since 2016 [12] - Technical analysis suggests a potential for further decline, with a strong sell rating indicating a 100% certainty of continued price decrease [13] Analyst Ratings - Among 19 analysts covering Carmax, 11 rate it a Buy with a target price of $77.94, which is 71% higher than its current share price [13] - Analysts are generally slow to revise target prices downward, which may not reflect the current market conditions accurately [13] Economic Indicators - The U.S. GDP rose by 3.8% on an annualized basis in the second quarter, but this growth was partly due to a decline in imports from tariffs [14] - Household debt reached $185 billion in the second quarter, with a delinquency rate of 4.4%, indicating potential financial strain on consumers [15] Options Strategy - A long strangle strategy involving a $47.50 call and a $40 put was set up, requiring Carmax's share price to exceed $49.55 or drop below $37.95 to be profitable [16] - The expected price movement is 7.38% in either direction, with a profit probability of only 27.3% [17]

Group 1 - Palantir Technologies Inc stock is experiencing resistance at peak call open interest levels and February highs following the recent first-quarter results [1] - The stock's post-earnings rebound has stalled around the 50% year-to-date level and the 78.6% Fibonacci retracement, indicating potential for lower highs [1] - Short interest constitutes only 2.3% of the equity's available float, the lowest level since March, allowing room for short sellers to increase their positions [4] Group 2 - The peak call open interest at the 125-strike is acting as resistance, and a decline below $115 could attract shares towards the 100-strike [4] - The stock's Schaeffer's Volatility Scorecard (SVS) is 83 out of 100, indicating it has surpassed options traders' volatility expectations over the past year [5] - A recommended June put option has a leverage ratio of 5.5, which would double with a 15.8% drop in the underlying security [5]