Happy new year regards!
I've attempted to short Carvana (CVNA) three or four or six times before and got shafted every time. This time i finally decided to do some DD by asking AI to do some DD, based on SP500 inclusion criteria.
I pay for API access for historical stock data and tried to get chatgpt to use my API key to gather data and give me the DD; it wussed out and said "I can’t run authenticated API calls from this chat", so I used Gemini and also turned to the chinese and used Kimi k2's "OK computer" feature.
I didn't double check or cross reference any of their outputs and instead just just blindly bought about $6k worth of puts. $1k already expired cuz they were weeklies. Here's the position i have left on it. I'm thinking about yolo-ing more.
https://preview.redd.it/10mqcyb7zsag1.png?width=2980&format=png&auto=webp&s=6603acfe26a7a090e8201b61691b77d681be0799
I should mention that net net, i've never made money actively trading stocks or options overall in my 15 past years active trading stocks and options experience and am down about $200k to $300k (but 2026 is our year, this year's gonna be different, i promise)
Anyway, this is what gemini generated (it built a whole ass website for me):
https://preview.redd.it/6e3uc9g80tag1.png?width=2002&format=png&auto=webp&s=d8837f725736568c9361f7fbb049a333d84b239b
The following is what Kimi k2 generated:
https://preview.redd.it/ewsd2ni6xsag1.png?width=4760&format=png&auto=webp&s=ddf061162d4af35c1dd602e027006a90bc3f9388
https://preview.redd.it/yypuk4h3xsag1.png?width=5349&format=png&auto=webp&s=f0cc60e9d71c36ac5c7f29c738c0d603e7c34bd8
Here's what Kimi said:
# "CVNA S&P 500 Inclusion Short Thesis - Final Analysis Summary
# Executive Summary
This comprehensive analysis of 9 recent S&P 500 additions (2020-2025), enhanced with fundamental data including **PE ratios, debt loads, earnings timing**, provides **HIGH CONVICTION** evidence for a CVNA short thesis.
# Key Evidence
# 📊 Statistical Foundation
* **Sample Size**: 9 companies across multiple sectors and market conditions
* **Success Rate**: 67% of companies showed negative 4-week performance post-inclusion
* **Average Underperformance**: -6.60% relative to SPY over 4 weeks
* **Peak Period**: Weeks 3-4 (21-28 days post-inclusion)
# 🔍 Fundamental Risk Factors for CVNA
**1. High PE Ratio Impact** (>50x):
* **Average 4W Performance**: -16.95%
* **Average Relative Underperformance**: -19.88%
* **CVNA Relevance**: ✓ Expected high PE ratio
**2. Debt Load Impact** (Moderate to High):
* **Average 4W Performance**: -12.72% (moderate debt companies)
* **Average Relative Underperformance**: -15.65%
* **CVNA Relevance**: ✓ High debt load concerns
**3. Technology Sector Underperformance**:
* **Average 4W Performance**: -11.87%
* **Average Relative Underperformance**: -14.81%
* **CVNA Relevance**: ✓ Technology sector
**4. Earnings Timing Impact** (Post-Inclusion):
* **Average 4W Performance**: -7.28% (earnings after inclusion)
* **CVNA Relevance**: ✓ Expected earnings after inclusion
**5. Fraud Allegations** (CVNA Specific):
* **Expected Additional Penalty**: -5% to -10%
* **CVNA Relevance**: ✓ Active fraud allegations
# 🎯 Expected CVNA Performance
**Base Case** (Conservative): -15% to -20% relative underperformance
**Bear Case** (High Conviction): -20% to -30% relative underperformance
**Extreme Case** (Perfect Storm): -30% to -40% relative underperformance
**Confidence Level**: 85%
**Risk/Reward Ratio**: 4:1 favorable
# Timeline Analysis
# 📅 Critical Timeline (What to Expect)
**Week 0 (Inclusion Date)**:
* **Expected Performance**: +2% to +5% (index fund buying)
* **Key Events**: Forced buying, temporary premium
* **Action**: Short 50% of position
**Week 1 (Days 1-7)**:
* **Expected Performance**: +1% to +3% (continued momentum)
* **Key Events**: Index fund completion, retail buying
* **Action**: Add remaining 50% if stock up >2%
**Week 2 (Days 8-14)**:
* **Expected Performance**: -2% to -5% (momentum fade)
* **Key Events**: Smart money positioning for decline
* **Action**: Hold full position
**Week 3 (Days 15-21)**:
* **Expected Performance**: -8% to -12% (underperformance accelerates)
* **Key Events**: Put buying increases, fundamental concerns
* **Action**: Monitor for exit signals
**Week 4 (Days 22-28)**:
* **Expected Performance**: -10% to -15% (peak underperformance)
* **Key Events**: Maximum pessimism, best exit point
* **Action**: **EXIT POSITION** (take profits)
**Week 8 (Days 29-56)**:
* **Expected Performance**: -5% to -10% (some recovery)
* **Key Events**: Long-term buyers emerge, earnings clarity
* **Action**: Post-analysis, lessons learned
# Trading Strategy
# 🚀 Optimal Execution Plan
**Entry Strategy**:
1. **Primary Entry**: Short CVNA immediately on S&P 500 inclusion (Week 0)
2. **Scale-In**: 50% position on inclusion, 50% in Week 1 if momentum continues
3. **Vehicle**: Put options 3-4 weeks to expiration, 5-10% OTM
**Position Sizing**:
* **Conservative**: 3-5% of portfolio
* **Aggressive**: 7-10% of portfolio (high conviction)
* **Extreme**: 12-15% of portfolio (maximum risk/reward)
**Exit Strategy**:
1. **Target 1**: -15% relative underperformance (take 50% profit)
2. **Target 2**: -25% relative underperformance (exit completely)
3. **Stop Loss**: If CVNA outperforms SPY by +5% in Week 1
4. **Time Stop**: Exit by Week 4 regardless of performance
**Risk Management**:
* **Hedging**: Consider long SPY calls for market beta
* **Position Management**: Scale out profits gradually
* **Monitoring**: Watch for earnings announcements
# Historical Precedents
# 📈 Most Similar to CVNA
**SMCI (Super Micro Computer)**:
* High PE (60-80x), growing debt, tech sector
* **4W Performance**: -11.78%
* **Relative Underperformance**: -14.72%
**CRWD (CrowdStrike)**:
* Extremely high PE (400-450x), moderate debt, tech sector
* **4W Performance**: -30.17%
* **Relative Underperformance**: -33.10%
**DASH (DoorDash)**:
* Very high PE (100-120x), moderate debt, consumer tech
* **4W Performance**: -13.65%
* **Relative Underperformance**: -16.58%
# Risk Factors & Mitigation
# ⚠️ Primary Risks
**1. Market Rally Risk**:
* **Mitigation**: Long SPY calls to hedge market beta
* **Probability**: Medium
**2. Company-Specific Catalysts**:
* **Risk**: Positive earnings, fraud resolution, debt refinancing
* **Mitigation**: Stop loss at -5% outperformance vs SPY
* **Probability**: Low-Medium
**3. Index Fund Demand**:
* **Risk**: Sustained institutional buying
* **Mitigation**: Time stop at Week 4
* **Probability**: Low
**4. Volatility Expansion**:
* **Risk**: Market-wide volatility increases
* **Mitigation**: Proper position sizing, VIX hedging
* **Probability**: Medium
# Statistical Validation
# 📊 Confidence Intervals
**95% Confidence Interval**: -10% to -25% relative underperformance
**68% Confidence Interval**: -15% to -20% relative underperformance
**Most Likely Outcome**: -17% relative underperformance
**Sample Robustness**:
* Multiple sectors represented
* Various market conditions (2020-2025)
* Different company sizes and characteristics
* Consistent patterns across different time periods
# Conclusion
# 🎯 Final Recommendation: STRONG SHORT CONVICTION
**CVNA exhibits multiple risk factors that historically led to significant post-S&P 500 inclusion underperformance:**
1. ✅ **High PE Ratio** (expected >50x)
2. ✅ **High Debt Load** (known concerns)
3. ✅ **Technology Sector** (worst performing sector)
4. ✅ **Fraud Allegations** (unique penalty)
5. ✅ **Earnings After Inclusion** (uncertainty factor)
**Expected Outcome**: 15-25% relative underperformance vs SPY over 3-4 weeks
**Trading Plan**:
* **Entry**: Week 0 (inclusion date) at market open
* **Peak Profit**: Week 3-4 (21-28 days post-inclusion)
* **Exit**: Week 4 (take profits, don't hold too long)
* **Position Size**: 5-10% of portfolio (high conviction)
**This represents one of the highest-conviction S&P 500 inclusion short opportunities based on our comprehensive analysis.**
*Analysis based on 9 recent S&P 500 additions with complete fundamental data*
*Enhanced with PE ratios, debt analysis, earnings timing, and sector comparisons*
*All data sources documented and methodology transparent"*
**And Below is the prompt that i pasted into gemini, chatgpt, and kimi k2 for you regards to try yourself:**
"I want to short CVNA soon, thinking that once it’s fully included into the SP500, the stock will get beaten down quite a bit, mainly due to its debt-load and allegations of fraud that it has on it
* can you investigate companies that were included in the SP500 in recent years and see what happened to their stock prices before the announcement, after the announcement, and then after the inclusion date, and also after the new year (factor in the santa claus rally) for the announcements that happen in december
* some companies that come to mind are TSLA, SMCI, **ABNB, DASH, COIN, DECK, CRWD, KKR, GDDY**
use a weekly time window, as in I want to buy puts that are maybe two weeks to a month out. Focus on all range of recent sp500 entrants, be sure to research and compare their debt load and multiples and margins
* Can you create a table comparing the stocks mentioned above, including their
* ticker,
* announcement date
* inclusion date,
* PE ratio at the time of their inclusion date
* PS ratio at the time of their inclusion date
* debt load at the time of their inclusion date,
* asset to debt ratios
* stock price at announcement date
* stock price at inclusion date
* spy price at inclusion date
* percentage difference between stock price at announcement date to inclusion date
* their stock performance 1 week, 2weeks, 3 weeks, 4 weeks, 2 months, and 3 months, and 1 year after their inclusion date (in percentage)
* SPY performance (%) 1 week, 2 weeks, 3 weeks, 4 weeks, 2 months, and 3 months, and 1 year after their inclusion date?
Here is my <provider's> api key: <ur\_gay> "
TLDR: NFA, you'll probably lose money, just like i did/will. Happy new year!