KMX February 2026 Options Begin Trading

CarMax (KMX) option ideas: selling the $35 put (bid $0.50) obligates purchase at $35 putting cost basis at $34.50 versus the current $40.50 share price, the $35 strike is ~14% out-of-the-money with a 77% chance to expire worthless and would yield 1.43% (8.15% annualized) on the cash commitment. Alternatively, selling a $50 covered call (bid $0.50) against shares bought at $40.50 caps upside at $50 (~23% premium) and would produce a 24.69% total pre-commission return if called at the February 2026 expiration, with a 73% odds of expiring worthless; implied vols are ~65% (put) and 63% (call) versus a 12‑month realized volatility of ~53%.

Analysis

Market structure: The current option market is rewarding premium sellers — a $35 Feb‑2026 put at $0.50 implies a cash‑secured effective buy price of $34.50 vs spot $40.50, and a 77% model chance to expire worthless; similarly a $50 covered call yields 24.7% total if called and a 73% chance to expire worthless. Elevated implied vols (put 65%, call 63%) vs realized ~53% (≈10–12 vol ppt premium) show demand for tail protection or skewed directional positioning into auto‑cycle uncertainty. Cross‑asset impact is contained but relevant to credit: a sharp KMX drawdown would pressure subprime auto ABS spreads and regional bank exposure to floorplan financing within weeks to months.

Risk assessment: Tail risks include a rapid used‑car price collapse (Manheim index down 15%+), a Fed shock raising auto loan rates 100bp+ in 60–90 days, or a regulatory hit to buyback/floorplan practices — any could push KMX below $30 (30% downside). Short horizon (days–weeks): option sellers face assignment volatility spikes; medium (quarters): earnings, Manheim indices, and Fed decisions drive residue; long (years): secular used‑car demand and online disruptors determine market share. Hidden dependencies: inventory turn, wholesale auction prices, and floorplan liquidity; catalysts are Manheim weekly prints, KMX earnings, and Fed statements.

Trade implications: If comfortable owning KMX, favor selling cash‑secured Feb‑2026 $35 puts at $0.50 size 1–2% AUM (effective buy $34.50); close/hedge if KMX < $30 or IV > 80%. Alternative: buy up to $40.50 and sell Feb‑2026 $50 calls at $0.50 (covered call) for a 24.7% capped upside — size 1–2% AUM and plan to roll at $48. For more defensive exposure, sell a 35/30 put credit spread for ~0.35 net credit (max risk $4.65) to limit assignment risk; target taking profits at 50% of max credit.

Contrarian angles: Consensus option sellers earn modest YieldBoosts but may underprice structural downside if used‑car demand reverts sharply — the market is likely underestimating floorplan and ABS spillovers. Conversely, implied vol ≈10–12 ppt rich vs realized suggests option selling is asymmetrically attractive on a volatility mean‑reversion view; the trade is timing‑sensitive — sell premium when IV >70% and avoid naked exposure if macro data (Manheim, CPI, Fed) turn adverse. Historical parallel: 2021 used‑car spike then 2022 collapse — prepare stop/hedge rules rather than a binary sell/hold stance.

Key Decisions for Investors

• Sell-to-open Feb‑2026 KMX $35 cash‑secured puts @ $0.50 (effective buy $34.50) for a position sized 1–2% AUM; close or buy protection if KMX trades below $30 for 3 consecutive sessions or if IV spikes >80% (loss limit trigger).
• Buy KMX up to $40.50 and sell Feb‑2026 $50 covered calls @ $0.50 to target a 24.7% capped return; position size 1–2% AUM, roll or buy back if KMX > $48 or if macro (Manheim index or Fed) signals structural downside within 60 days.
• If assignment risk unacceptable, sell Feb‑2026 35/30 put credit spreads for ~0.35 net credit (max risk $4.65) sized 0.5–1% AUM; take profits at 50% of max credit or cut at 2x unrealized adverse movement.
• Hedge systemic auto risk: allocate 0.5–1% AUM to buying longer‑dated KMX puts (e.g., Dec‑2025 $30) or buying protection on an auto‑retail basket if Manheim monthly falls >10% month‑over‑month or US 2yr rate rises >75bp in 90 days.