Unusual Options Activity: Rivian Automotive (RIVN)

Electric vehicle manufacturer Rivian Automotive (RIVN) saw shares sink 25 percent last week following earnings. One trader is betting that the drop was an overreaction and shares will trend higher.

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  • That’s based on the April $12.50 calls. With 52 days until expiration, 7,784 contracts traded compared to a prior open interest of 173, for a 45-fold rise in volume on the trade. The buyer of the calls paid $0.98 to make the bullish bet.

    Rivian shares slid to about $11.50 after earnings, meaning shares need to rise $1.00, or about 8.7 percent, for the option to move in-the-money. Rivian trades near its 52-week low of $11.06.

    The EV producer is down 15 percent over the past year. Revenue growth continues to rise, and was a bright spot in the earnings report, up 98 percent.

    But Rivian is still deeply unprofitable, and revenue growth has yet to translate to a profit. With EV sales slowing overall, that could make for an uphill battle for shares.

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  • Action to take: Rivian looks oversold in the short-term following its earnings miss. Shares will likely retrace some of their loss in the coming weeks, which could lead to a quick 10-15 percent gain for shareholders.

    For traders, the likelihood of a retracement makes the April $12.50 calls attractive. They could see high double-digit returns or better if shares rebound.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.

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