Options trades send Rivian stock on a rocket: Up 83% in eight days
Rivian
On the morning of July 11, Beijing time, it was reported that with the improvement of fundamentals, Rivian, a new American electric car company, has recently become the “darling” of the capital market.
Options trading is extremely active, and investors are betting heavily on Rivian’s call options.
Some market participants said the round of trading in short-term options led to Rivian’s recent nine-day winning streak, the first time in the company’s history.
Investors are flooding up call options contracts, making bullish bets on Rivian stock.
Rivian options contracts traded 831,000 contracts on Monday, twice its average daily volume and the third-most-traded individual company volume in the U.S. options market, behind Tesla and Apple.
Daniel Kirsch, director of options at Piper Sandler, said the bulk of the options trade was “ultra-short-term calls,” adding that the options activity helped drive Rivian’s stock price higher.
The sharp rise in Rivian stock began last week when the company reported second-quarter earnings that beat Wall Street analysts’ expectations for electric vehicle deliveries, spurring trading sentiment.
It is reported that in the past eight trading days, Rivian’s stock price has soared by 83%.
On Monday local time, the number of Rivian stock option contract transactions reached 831,000, which is more than twice its usual daily option trading volume.
Daniel Kirsch, head of the options business at U.S. investment bank Piper Sandler, said that most of Rivian’s stock option transactions are “ultra-short-term call options”, which will allow Rivian’s stock price to rise further.
According to reports, the out-of-the-money call option is an option that has not yet made a profit.
If the stock price of a listed company rises in the future, this option will increase in value.
If there is a large amount of out-of-the-money call options bought in the market, it often creates an additional pull effect on the stock price.
Gamma squeeze
It is reported that such an option trading phenomenon is also called “gamma squeeze”, that is, if an option trading market maker sells stock options, in order to hedge risks, they will often buy some stocks, which will eventually lead to a rise in stock prices.
Over the past few years, gamma squeezes have occurred in some of the most actively traded stocks in stock options, such as electric vehicle leader Tesla and American movie theater company AMC.
The above-mentioned expert Kosh said that the phenomenon surrounding Rivian’s stock price reminded him of Tesla stock.
When Tesla’s stock price was rising, some option investors would buy ultra-short-term out-of-the-money call options, which resulted in Tesla shares rose even more.
Kirsh also noted that Rivian stock options have recently been actively traded by both retail and institutional investors.
Rivian stock has been supported by positive factors over the past week, including Rivian’s production and delivery targets.
Rivian’s recent reaffirmation that “it’s on track with its previously provided annual production target of 50,000 vehicles” also helped the stock get Wedbush to raise its price target to $30 from $25.
Rivian’s stock has had its fair share of ups and downs, with the company’s headline-grabbing initial public offering (IPO) in November 2021, at one point hitting a per-per-month high amid buoyant investor sentiment around electric vehicles and the broader stock market. Shares hit a high of $179.
On Monday, in the options trading sector of the US capital market, Rivian was the third largest company in terms of options trading volume, second only to Tesla and Apple. 42% of Rivian options contracts expire this Friday.
In addition to Rivian, NIO’s option trading was also very active on the day, and the company’s option trading volume ranked tenth in the entire market.
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