Carvana (CVNA) Surges 4.9% Amid Subprime Loan Warnings and CEO Share Sales: What’s Fueling the Rally?

Summary
• Carvana’s stock (CVNA) surges 4.9% to $387.43, hitting an intraday high of $390.10.
• Morningstar report flags 28.7% delinquency in Carvana’s subprime auto loan pools, raising red flags.
• CEO Ernie Garcia III sells $3.46M in shares, sparking insider concern.
• Sector leader Carmax (KMX) dips 0.06%, contrasting CVNA’s rally.
Carvana’s stock is surging amid a volatile mix of retail investor enthusiasm and looming risks. With a 4.9% intraday gain, the stock is testing its 52-week high of $413.34, but a Morningstar report on subprime loan delinquencies and CEO share sales have investors on edge. The rally appears driven by short-term speculative fervor, though underlying fundamentals remain under scrutiny.

Subprime Loan Delinquencies and CEO Sales Spark Investor Anxiety
Carvana’s 4.9% intraday surge is fueled by a combination of retail investor hype and a Morningstar report revealing 28.7% delinquency rates in its 2022 subprime auto loan pools. The report highlights 12.7% of these loans are over 60 days delinquent, with $29.9M in repossession losses. While newer 2025 loan pools show improved health, the older tranches remain a liability. Meanwhile, CEO Ernie Garcia III’s recent $3.46M share sale has raised eyebrows, suggesting insider caution. The stock’s rally appears disconnected from these risks, driven instead by speculative momentum and social media-driven retail buying.

Options Playbook: Leveraging Volatility in a High-Risk Rally
• 200-day average: 280.54 (well below current price)
• RSI: 48.29 (neutral, not overbought)
• MACD: 5.09 (bullish divergence from signal line 5.95)
• Bollinger Bands: Price at 389.81 (near upper band), suggesting overbought conditions
Carvana’s technicals paint a mixed picture. While the 200-day average is far below current levels and RSI remains neutral, the MACD histogram (-0.87) hints at weakening momentum. The stock is trading near its Bollinger upper band, a potential short-term resistance. For options traders, the key is to balance bullish exposure with risk mitigation. Two contracts stand out:

• CVNA20251003C390
- Type: Call
- Strike Price: $390
- Expiration: 2025-10-03
- IV: 57.24% (moderate volatility)
- Leverage Ratio: 41.04% (high)
- Delta: 0.4837 (moderate sensitivity)
- Theta: -2.53 (high time decay)
- Gamma: 0.0153 (high sensitivity to price changes)
- Turnover: 582,442 (liquid)
- Payoff at 5% upside: $13.67 (max(0, 406.30 - 390))
This call option offers high leverage and liquidity, ideal for a short-term bet on a breakout above $390. The high gamma ensures responsiveness to price swings, while the moderate delta balances risk.

• CVNA20251003C395
- Type: Call
- Strike Price: $395
- Expiration: 2025-10-03
- IV: 61.13% (elevated)
- Leverage Ratio: 48.24% (very high)
- Delta: 0.4161 (moderate)
- Theta: -2.37 (high decay)
- Gamma: 0.0141 (high)
- Turnover: 567,242 (liquid)
- Payoff at 5% upside: $11.30 (max(0, 406.30 - 395))
This contract offers even higher leverage and is positioned to capitalize on a sustained rally. The elevated IV reflects market uncertainty, making it a high-reward/high-risk play.

Aggressive bulls should consider CVNA20251003C395 into a break above $390.

Backtest Carvana Stock Performance
Below is an interactive back-test dashboard that summarises the 5 %-surge strategy on Carvana (CVNA) from 2022-01-01 to 2025-09-28. (Click the module to expand and explore each metric.)Key take-aways:• The setup captures momentum pops but is extremely volatile—maximum drawdown exceeded 98 %, underscoring Carvana’s boom-bust nature. • Average trade return is positive (~3 %), yet losses on the worst trades are steep, demanding tight money-management rules. • Despite a headline annualised figure, the negative total return signals that gains are concentrated in a few outsized winners. Parameter decisions filled in for you: 1. price_type = “close” – standard for surge-based studies. 2. max_holding_days = 10 – a typical momentum holding window; feel free to extend/shorten and re-run.Let me know if you’d like to adjust holding period, add stop-loss/take-profit thresholds, or test the same trigger on other tickers.

Bullish Momentum vs. Looming Risks: What to Watch Now
Carvana’s 4.9% rally is a high-stakes game of momentum versus fundamentals. While the stock’s technicals suggest a potential overbought condition, the Morningstar report on subprime loan delinquencies and CEO share sales cast a shadow over its sustainability. Investors should monitor the 390.10 intraday high as a critical resistance level and watch for a breakdown below the 371.52 20-day moving average. Sector leader Carmax (KMX) is down 0.06%, indicating broader automotive retail caution. For now, the rally appears driven by speculative fervor, but a 35% delinquency spike in older loan pools could trigger a sharp reversal. Aggressive bulls should target CVNA20251003C395 if $390 breaks, but watch for a 370 support test.