September 12th Options Now Available For Rivian Automotive (RIVN)

The article outlines two options strategies for Rivian Automotive Inc. (RIVN), currently trading at $12.99. Selling a $12.50 strike put for $0.60 offers an effective acquisition cost of $11.90, with a 62% probability of expiring worthless, yielding a 40.74% annualized return if unexercised. Alternatively, a covered call strategy, involving buying RIVN at $12.99 and selling a $13.50 strike call for $0.94, could generate an 11.16% total return if called away, or a 61.42% annualized premium if the call expires worthless (48% probability). These strategies leverage RIVN's implied volatilities of 78% for puts and 87% for calls, against its 64% historical volatility, offering distinct approaches for income generation or discounted share acquisition.

Analysis

The analysis focuses on two distinct options strategies for Rivian Automotive Inc. (RIVN), which is currently trading at $12.99 per share. The first strategy involves selling a cash-secured put with a $12.50 strike price for a $0.60 premium. This approach offers a potential acquisition cost basis of $11.90 per share, a discount to the current market price, and carries a 62% statistical probability of expiring worthless, which would generate a 40.74% annualized return on the cash commitment. The second strategy is a covered call, where an investor buys shares at $12.99 and sells a $13.50 strike call for a $0.94 premium. This could yield a total return of 11.16% if the shares are called away, or an annualized premium yield of 61.42% if the option expires worthless, an event with a 48% probability. A key insight from the data is the significant spread between the options' implied volatilities (78% for the put, 87% for the call) and the stock's actual trailing twelve-month volatility of 64%. This elevated implied volatility suggests that option premiums are currently rich relative to the stock's historical price movements, creating potentially attractive conditions for premium-selling strategies.

Key Decisions for Investors

• For investors bullish on RIVN but seeking a lower entry point, selling the $12.50 cash-secured put offers a way to either acquire shares at an effective cost of $11.90 or generate a high annualized yield if the stock price remains above the strike.
• Current RIVN shareholders could consider the covered call strategy by selling the $13.50 call to generate immediate income and achieve a potential 11.16% total return, while acknowledging that this caps upside gains beyond the strike price.
• Investors should recognize that the elevated implied volatility relative to historical volatility creates a favorable environment for selling options premium, but this also signals that the market anticipates significant price swings in RIVN, which is a key risk factor for these strategies.