KMX Options Defensiveness Sharpens as Shorts Accelerate Their Exit

CarMax heads into its September 29 print with two signals that have moved materially since the last preview: options traders have turned notably more defensive, while short sellers have accelerated their retreat.

The options shift is the sharpest development. The put/call ratio jumped to 0.55 on Thursday — more than 2.4 standard deviations above its 20-day average of 0.50. That is the most defensive options posture CarMax has seen in months, despite the ratio remaining well below the 52-week high of 0.89. The move is meaningful precisely because it happened fast: the PCR had been hugging its average for weeks before spiking into the close before the print. Borrow conditions, meanwhile, remain entirely relaxed — availability is effectively unconstrained, and the cost to borrow has ticked up 38% on the week to 0.45% but remains trivially cheap. There is no squeeze pressure from the lending market.

Short sellers are telling a different story. The covering that was underway three days ago has accelerated sharply. Short interest dropped 11% in a single session on September 24, falling to 6.7% of the free float — down from a mid-August peak near 9.4% of float when roughly 13.8 million shares were short. That unwind is now about 27% complete in monthly terms. The direction of travel is unambiguous: bears have been reducing exposure into the print, not adding. The ORTEX short score has also eased to 43.9, down from the mid-46 range it held for most of the past two weeks.

The analyst backdrop has improved noticeably in the final stretch before earnings. Stephens lifted its target to $74 on September 25, keeping an Overweight rating. JP Morgan raised its target to $70 on September 18, while Morgan Stanley moved to $47 — all three maintaining their existing ratings. The consensus is Hold, with the mean target near $57, essentially in line with the current price of $57.21. Bulls point to CarMax's omni-channel scale and cost discipline as durable advantages in a fragmented used-car market. Bears flag the competitive pressure from Carvana and the company's reliance on consumer financing at a moment when credit conditions remain uncertain. The stock is down 11% over the past month despite a modest bounce on Friday, suggesting the market has already done some work pricing in caution — AQR notably trimmed its position significantly, while American Century added nearly 1.9 million shares in the most recent reporting period.

The September 29 print will test whether the accelerating short cover reflects genuine confidence in the quarter, or simply pre-earnings risk management from bears who would rather step aside than fight a potentially positive print.