November 14th Options Now Available For Rivian Automotive (RIVN)

The article presents two options strategies for Rivian Automotive Inc. (RIVN) based on its current trading price of $13.41, highlighting opportunities for income generation or discounted share acquisition. Selling a $10 strike put for 14 cents offers an 11.87% annualized return with a 90% probability of expiring worthless, while selling a $16 strike covered call for 58 cents yields a 36.68% annualized return with a 67% chance of expiring worthless. These strategies are presented in the context of RIVN's implied volatility (78-81%) being notably higher than its 61% trailing 12-month historical volatility, suggesting potentially rich premiums for options sellers.

Analysis

The options market for Rivian Automotive Inc. (RIVN), currently trading at $13.41, presents strategies for both income generation and discounted share acquisition, driven by elevated implied volatility. The implied volatility for the specified put (78%) and call (81%) contracts is notably higher than the stock's trailing twelve-month historical volatility of 61%, indicating that option premiums are currently rich. For investors interested in acquiring shares, selling the $10.00 strike put contract for a 14-cent premium offers a potential cost basis of $9.86, a 25% discount from the current price, with analytics suggesting a 90% probability of the option expiring worthless and generating an 11.87% annualized return on cash. Alternatively, for current shareholders, writing a covered call at the $16.00 strike for a 58-cent premium could yield a 23.64% total return if the stock is called away, or a 36.68% annualized yield boost if the option expires worthless, an event with a 67% probability. These scenarios highlight how the current volatility spread can be monetized by option sellers, though it also implies significant expected price movement.

Key Decisions for Investors

• Investors bullish on RIVN but seeking a lower entry point could consider selling the $10.00 cash-secured put to either acquire shares at an effective cost of $9.86 or generate an 11.87% annualized yield.
• Existing RIVN shareholders could capitalize on the elevated implied volatility (81% vs. 61% historical) by writing covered calls, such as the $16.00 strike, to generate premium income and achieve a potential 36.68% annualized yield while retaining the position if it expires worthless.
• Given the significant spread between implied and historical volatility, traders should recognize that while selling options offers attractive premiums, it also comes with the risk of assignment on puts during a sharp downturn or capped upside on calls during a strong rally.