KMX Straddle Strategy
KMX (CarMax, Inc.), in the Consumer Cyclical sector, (Auto - Dealerships industry), listed on NYSE.
CarMax, Inc., together with its associated entities, functions as a prominent purveyor of previously owned automobiles across the United States. Its business operations are strategically structured into two principal divisions: CarMax Sales Operations and CarMax Auto Finance. Through its retail offerings, the company provides an extensive selection of pre-owned vehicles, including various domestic, imported, and luxury models, in addition to hybrid and electric options. Customers also have the opportunity to purchase extended protection plans at the time of their vehicle acquisition. Separately, CarMax sells older, higher-mileage vehicles—typically around ten years old with over 100,000 miles—via wholesale auctions. Furthermore, CarMax delivers reconditioning and repair services for its vehicles.
KMX (CarMax, Inc.) trades in the Consumer Cyclical sector, specifically Auto - Dealerships, with a market capitalization of approximately $7.49B, a trailing P/E of 33.63, a beta of 1.20 versus the broader market, a 52-week range of 30.26-71.99, average daily share volume of 3.6M, a public-listing history dating back to 1997, approximately 30K full-time employees. These structural characteristics shape how KMX stock options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 1.20 places KMX roughly in line with broader market moves, so the strategy payoff and realized volatility track the index-equivalent baseline.
What is a straddle on KMX?
A long straddle buys an ATM call and an ATM put at the same strike, profiting from a large move in either direction; max loss equals the combined debit when the underlying pins to the strike at expiration.
Current KMX snapshot
As of June 26, 2026, spot at $52.22, ATM IV 38.70%, IV rank 13.71%, expected move 11.09%. The straddle on KMX below is built from the same end-of-day chain, with strikes snapped to listed contracts and premiums pulled from the bid/ask midpoint at a 18-day expiry.
Why this straddle structure on KMX specifically: KMX IV at 38.70% is on the cheap side of its 1-year range, which favors premium-buying structures like a KMX straddle, with a market-implied 1-standard-deviation move of approximately 11.09% (roughly $5.79 on the underlying). The 18-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated KMX expiries trade a higher absolute premium for lower per-day decay. Position sizing on KMX should anchor to the underlying notional of $52.22 per share and to the trader's directional view on KMX stock.
KMX straddle setup
The KMX straddle below is built from the end-of-day chain, with each option leg priced at the bid/ask midpoint of its listed strike. With KMX near $52.22, the first option leg uses a $52.50 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed KMX chain at a 18-day expiry; the cross-strike IV skew is reflected directly in the per-leg values rather than approximated. Quantity sizing assumes one contract per option leg (or 100 KMX shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 1 | Call | $52.50 | $2.15 |
| Buy 1 | Put | $52.50 | $1.50 |
KMX straddle risk and reward
- Net Premium / Debit
- -$365.00
- Max Profit (per contract)
- Unbounded
- Max Loss (per contract)
- -$363.74
- Breakeven(s)
- $48.85, $56.15
- Risk / Reward Ratio
- Unbounded
Upside max profit is unbounded; downside max profit is bounded at the strike minus the combined call plus put debit (reached at zero). Max loss equals the combined debit times 100 (reached when the underlying pins to the strike). Two breakevens at strike plus debit and strike minus debit.
KMX straddle payoff curve
Modeled P&L at expiration across a range of underlying prices for the straddle on KMX. Each row is one sampled price point from the computed payoff curve; the full curve uses 200 price points internally before being summarized into 10 rows here.
| Underlying Price | % From Spot | P&L at Expiration |
|---|---|---|
| $0.01 | -100.0% | +$4,884.00 |
| $11.56 | -77.9% | +$3,729.50 |
| $23.10 | -55.8% | +$2,574.99 |
| $34.65 | -33.7% | +$1,420.49 |
| $46.19 | -11.5% | +$265.99 |
| $57.74 | +10.6% | +$158.51 |
| $69.28 | +32.7% | +$1,313.02 |
| $80.83 | +54.8% | +$2,467.52 |
| $92.37 | +76.9% | +$3,622.02 |
| $103.92 | +99.0% | +$4,776.52 |
When traders use straddle on KMX
Straddles on KMX are pure-volatility plays that profit from large moves in either direction; traders typically buy KMX straddles ahead of earnings, FDA decisions, or other catalysts where the realized move is expected to exceed the implied move priced into the chain.
KMX thesis for this straddle
The market-implied 1-standard-deviation range for KMX extends from approximately $46.43 on the downside to $58.01 on the upside. A KMX long straddle is a pure-volatility play: it profits when the underlying moves far enough from the strike in either direction to overcome the combined call plus put debit, regardless of direction. Current KMX IV rank near 13.71% sits in the lower third of its 1-year distribution, where IV often re-expands toward the mean; this favors premium-buying structures and disadvantages premium-selling structures on KMX at 38.70%. As a Consumer Cyclical name, KMX options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to KMX-specific events.
KMX straddle positions are structurally neutral / high-volatility (long premium); the modeled P&L assumes European-style exercise at expiration and ignores early assignment, transaction costs, dividends paid before expiry on the stock leg (when present), and the bid-ask spread on the listed chain. KMX positions also carry Consumer Cyclical sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move KMX alongside the broader basket even when KMX-specific fundamentals are unchanged. Always rebuild the position from current KMX chain quotes before placing a trade.
Frequently asked questions
- What is a straddle on KMX?
- A straddle on KMX is the straddle strategy applied to KMX (stock). The strategy is structurally neutral / high-volatility (long premium): A long straddle buys an ATM call and an ATM put at the same strike, profiting from a large move in either direction; max loss equals the combined debit when the underlying pins to the strike at expiration. With KMX stock trading near $52.22, the strikes shown on this page are snapped to the nearest listed KMX chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are KMX straddle max profit and max loss calculated?
- Upside max profit is unbounded; downside max profit is bounded at the strike minus the combined call plus put debit (reached at zero). Max loss equals the combined debit times 100 (reached when the underlying pins to the strike). Two breakevens at strike plus debit and strike minus debit. For the KMX straddle priced from the end-of-day chain at a 30-day expiry (ATM IV 38.70%), the computed maximum profit is unbounded per contract and the computed maximum loss is -$363.74 per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a KMX straddle?
- The breakeven for the KMX straddle priced on this page is roughly $48.85 and $56.15 at expiration, derived from end-of-day chain premiums. Breakeven is the underlying price at which the strategy's P&L crosses zero ignoring transaction costs and assignment risk. The current KMX market-implied 1-standard-deviation expected move is approximately 11.09%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a straddle on KMX?
- Straddles on KMX are pure-volatility plays that profit from large moves in either direction; traders typically buy KMX straddles ahead of earnings, FDA decisions, or other catalysts where the realized move is expected to exceed the implied move priced into the chain.
- How does current KMX implied volatility affect this straddle?
- KMX ATM IV is at 38.70% with IV rank near 13.71%, which is on the low end of its 1-year range. Premium-buying structures (long call, long put, debit spreads) are relatively cheap in this regime; premium-selling structures collect less credit per unit risk.