Carvana is skidding hard

Carvana has been struggling on all fronts and not much is going the way management would have planned.  Car sales at the glitzy used car retailer have been flat for the past year in one of the hottest auto sales markets in history, which may be the canary in the coalmine signaling the coming end of the frenzy in the auto market.  They also issued over $6B of debt last week at much higher interest rates and a substantial discount to par on their bonds, earning them the dubious title of 'junk bond' status. 

As if that wasn't bad enough, famed short seller Jim Chanos announced a short position in Carvana, on top of multiple analyst downgrades in the company's share price. 

The company is not only uninvestable from a long perspective, but we see further downside as we have little to no confidence in a turnaround any time in the near future. To capitalize on this view we are buying the June 2022 $60 Puts on CVNA for $6.40, these options expire in 52 days. This is a low risk trade considering the trend is on our side, the overall market is also trending lower, and we see a very low probability that shares rip higher from this current level.