Selling put options before a company's earnings announcement can be a valid strategy for options traders seeking to capitalize on higher than normal volatility. One of the primary reasons traders may consider selling a Occidental Petroleum (OXY) put option before their earnings announcement on next week is the elevated implied volatility. Earnings reports can trigger significant price movements, and this volatility results in an increase in option premiums. By selling the put option before the announcemen ...

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]