Rivian Automotive Inc. (RIVN)

Update 3/1/2023: I exited my short bull put vertical spread on RIVN, 51 days before expiration, for a $0.52 debit per contract/share, a profit before fees of $27 per contract. Shares were trading at $17.80, down $1.20 from the entry level.

The Implied Volatility Rank at exit was 50.8%, up 9.6 points from the entry level.

I exited on the day after entry because the position reached 34.2% of maximum potential profit, well above my normal exit point for earnings plays of 25%

Shares fell by 6.3% over one day for a -2,305% annual rate. The options position produced a 51.9% return for a +18,952% annual rate.

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I have entered a short bear call vertical spread on RIVN, using options that trade for the last time 52 days hence, on April 21. The premium is a $0.79 credit per contract share and the stock at the time of entry was priced at $19.00.

The Implied Volatility Ratio stood at 41.2%.

Premium:	$0.79	Expire OTM
RIVN-bear call spread	Strike	Odds	Delta
Calls
Long	22.50	76.0%	35
Break-even	20.79	69.5%	42.5
Short	20.00	63.0%	50

The premium is 63.2% of the width of the position’s short/long spread. The profit zone covers a 9.4% move to the upside and an unlimited move to the downside.

The risk/reward ratio is 2.2:1, with maximum risk of $171 and maximum reward of $79 per contract.

How I chose the trade. The trade was placed to coincide with RIVN’s earnings announcement after the closing bell on the day of entry. The short strikes were set with knowledge that stock’s very short term expected move is $2.18 either way, based on options pricing, which gives a price range of $16.82 to $21.18. The Zacks Investment Research earnings surprise predictor gave RIVN a score of -7.11%, with a rank of 3(hold). The analysts’ consensus is that RIVN will announce a loss of 1.89 per share.

By Tim Bovee, Portland, Oregon, February 28, 2023

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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