Carvana's CVNA Plummets 12.88% Despite Record Earnings: What's Fueling the Selloff?

Summary
• Carvana (CVNA) slumps 12.88% to $308.34, erasing a $45.63 intraday gain
• Q3 revenue surges 55% to $5.65B, adjusted EBITDA hits $637M
• Options chain sees 12,000+ contracts traded, with 300-strike puts dominating
• Market grapples with earnings optimism vs. profit-taking pressures

Carvana’s stock plunged sharply post-earnings despite record revenue and profitability, sparking a 12.88% intraday drop. The selloff contrasts with a 55% revenue surge and $637M adjusted EBITDA, raising questions about market sentiment. With the stock trading below its 200-day moving average and options volatility spiking, traders are recalibrating positions ahead of the November 7 expiration.

Earnings Optimism Clashes with Profit-Taking Pressures
Carvana’s Q3 results—$5.65B revenue (55% YoY) and $637M adjusted EBITDA—defied expectations, yet the stock cratered 12.88%. The disconnect stems from two forces: 1) short-term profit-taking after a 78% YTD rally, and 2) skepticism over sustainability amid a $20B revenue run rate. The 52W high of $413.34 looms as a psychological barrier, while the 52W low of $148.25 underscores volatility. Analysts note the 44% retail unit growth may not offset macro risks like tariffs and inventory bottlenecks, triggering a defensive selloff.

Automotive Retail Sector Mixed as Carmax Gains
The automotive retail sector remains fragmented, with Carmax (KMX) bucking the trend by rising 0.7889% despite Carvana’s collapse. KMX’s resilience highlights divergent investor sentiment: while Carvana’s vertical integration model faces scrutiny over scalability, Carmax’s traditional retail approach appears more stable. However, Carvana’s 91.52 P/E ratio versus KMX’s 12.3x P/E suggests the market is punishing Carvana’s high-growth premium, even as its fundamentals improve.

Options Playbook: Capitalizing on Volatility and Key Levels
• 200-day MA: $296.36 (below current price)
• RSI: 48.24 (neutral)
• MACD: -4.18 (bearish divergence)
• Bollinger Bands: $319.59 (lower) to $386.76 (upper)
• Support/Resistance: 30D ($344.70) vs. 200D ($344.19)

Carvana’s technicals suggest a bearish near-term bias, with the 200-day MA ($296.36) acting as a critical support. The RSI at 48.24 indicates no overbought/oversold extremes, but the MACD’s -4.18 and bearish histogram signal momentum decay. Traders should monitor the $319.59 Bollinger lower band as a potential short-term floor. The options chain reveals two high-conviction plays:

• CVNA20251107P300 (Put, $300 strike, Nov 7 expiry):
- IV: 70.27% (high volatility)
- LVR: 33.96% (moderate leverage)
- Delta: -0.3657 (moderate sensitivity)
- Theta: -0.1591 (time decay)
- Gamma: 0.0110 (price sensitivity)
- Turnover: 1,088,139 (high liquidity)
- Payoff (5% downside): $15.87 (max profit if CVNA drops to $292.92)
This put offers a balance of leverage and liquidity, ideal for capitalizing on a 5% pullback. The high IV and moderate delta make it responsive to price swings without excessive time decay.

• CVNA20251107P305 (Put, $305 strike, Nov 7 expiry):
- IV: 69.56% (high volatility)
- LVR: 27.72% (moderate leverage)
- Delta: -0.4229 (higher sensitivity)
- Theta: -0.0912 (lower time decay)
- Gamma: 0.0116 (price sensitivity)
- Turnover: 204,098 (high liquidity)
- Payoff (5% downside): $22.37 (max profit if CVNA drops to $292.92)
This put’s higher delta and lower theta make it a safer bet for a prolonged bearish move, with strong liquidity ensuring smooth execution. The 69.56% IV reflects market anticipation of further volatility.

Action Alert: Aggressive bears should prioritize CVNA20251107P300 for a 5% downside scenario, while CVNA20251107P305 offers a more conservative, longer-term play. Both contracts benefit from the stock’s current technical setup and elevated volatility.

Backtest Carvana Stock Performance
Below is an interactive report that summarizes the requested back-test. It shows how a simple “buy after an intraday –13 % (or worse) drop” tactic on Carvana (ticker CVNA) would have behaved from 1 Jan 2022 through 30 Oct 2025.Key take-aways (2022-01-01 → 2025-10-30)• Cumulative return (strategy): +142.7 % • Annualized return: 97.5 % • Max draw-down: –97.7 % (highly volatile) • Sharpe ratio: 0.79 Interpretation1. Although the headline return is attractive, the punishing 97 % draw-down means risk is extreme—capital would have nearly been wiped out before recovering. 2. The result reflects the very small number of qualifying events; all gains stem from a single trade cluster in late 2023/early 2024 that rebounded sharply. 3. No risk controls (stop-loss, take-profit, holding-period cap) were applied. Adding them could materially alter both returns and draw-down. 4. Liquidity, gap risk, and transaction costs are not included; these would further reduce realised performance.Next steps• Test alternative exit rules (e.g., 5-day hold, fixed profit target, or trailing stop). • Examine position sizing (e.g., fraction of capital per signal) to manage risk. • Compare against a benchmark (buy-and-hold CVNA, sector ETF, S&P 500). Feel free to let me know if you’d like to iterate on any of these dimensions or explore other scenarios.

Short-Term Bear Case: Target $292.50 as Key Support
Carvana’s 12.88% intraday drop signals a critical inflection point. While Q3 results are robust, the stock’s technicals and options activity suggest a near-term bearish bias. Traders should watch the $292.50 support level (aligned with the 300-strike put’s breakeven) and the 200-day MA at $296.36. A breakdown below $292.50 could trigger a cascade of stop-loss orders, extending the selloff toward the 52W low of $148.25. Meanwhile, Carmax’s 0.78% gain highlights sector divergence, but Carvana’s high P/E and macro risks make it a volatile play. Act now: Short CVNA20251107P300 if $308.34 breaks below $301.32 (intraday low).