$Carvana Co.(CVNA)$ 

Wednesday post market earnings sparked a bullish price surge yesterday, with CVNA ending more than 50% up on the day.

2 piece of information caught my interest:

1) RSI indicators RSI6 and RSI12 were both above 80. This is a trigger for me that a counter is overbought. Another counter with similar indicator is $Tesla Motors(TSLA)$ 

2) The other is the reporting metric of the earnings. Carvana hasn't Increased its sales volume for cars (primary revenue channel). Instead, it's increase in profit per car sold was driven more from the liquidation of debts owed to them. They were selling off loans which they were currently holding to the bank. But if car sales numbers weren't going up, then the number of loans they hold are going to diminish and eventually run out. This points to signs of clever accounting and a company still in transition trying to put a more positive spin of a quarterly earnings.

These two reasons mark a discrepancy between the market's valuation of +56% vs and my own personal valuation of the company's result. Hence I decided to try buying a PUT option.

Today, Analysis also showed short interest shot up significantly (~5x) which further supports my hypothesis that Carvana is overbought and price must come down to correct for valuation.

The correction came sharper and faster than I expected. Wasn't expecting a correction below $22 today and queued to sell my option at a lower price for a 10% profit. The option price at its peak is about 50% profit for me right now. 

Managing risks - if the price didn't drop as much as I expected, my PUT option was until next week and I would have continued holding, especially given the amount of short interest in this stock. Also with the Fed announcement coming, I was confident there would be a better window to cut losses even if the price didn't drop today.

Gambler's ruin - doubling down on my risk would be buying the same PUT at a lower price or a higher value PUT to double my earnings when the price does correct. However this wasn't an approach I felt comfortable with as it left me with little recourse for if my hypothesis was wrong.

The amount profit might be small, but I feel like I learnt something from this trade. Hope to be able to use this experience for future trades.