Trade Idea: If You Are Bullish on EVs, Rivian (RIVN) Stock is Down 17% Today
Trade Idea: If You Are Bullish on EVs, Rivian (RIVN) Stock is Down 17% Today
By:Mike Butler
Rivian Automotive has found prior support in the $19-20 range
- Rivian announced a $1.5 billion offering in convertible notes and the stock price sold off aggressively on Thursday, October 5
- The EV company has beaten quarterly earnings-per-share (EPS) estimates four quarters in a row with double digit surprises each time
- Rivian beat revenue estimates by 10.27% last quarter, which was the first beat in three previous earnings revenue misses
Rivian Stock Performance in 2023
Rivian Automotive (RIVN) is a popular electric vehicle (EV) company that offers sport utility and pickup truck vehicles, which sets it apart from other companies like Tesla (TSLA). The stock announced that they are raising $1.5 billion and the stock sold off hard on October 5 2023. The stock is now hovering around $19 per share, after reaching a 2023 high of $28.04 on July 27 2023. This is now the third time the stock has reached the $19-20 range, and it has bounced off of this level previously:
The EV company is certainly still in its growth phase, posting negative EPS numbers each quarter historically, with an expectation that EPS will come in at -$1.32 on $1.30 billion in revenue when they report quarterly earnings on November 7 2023.
Growth stocks like this often experience plenty of stock price volatility, as we're seeing in the 17% selloff today.
Bullish EV Stock Trade Idea - Rivian Short Put Spread
We've seen RIVN stock rally as high as $28.04 this year, and we're almost $10 lower in just a few weeks with the news that came out today. With that said, we have seen a bounce from the $19-20 level a few times, so I'm willing to take a bullish stance as society continues to adopt electric vehicles across the country.
I'm selling a bullish vertical put spread in RIVN in the November monthly cycle, with 43 days to expiration for $205. As long as RIVN stays above $20 per share, I'll keep the $205 at expiration as max profit on the trade.
This put spread is $7.5 wide, which means the max spread value is $750 if RIVN stock were to drop below $12.5. In that case, my max loss would be $750 - $205 = $545.
I'm willing to take a bullish stance with a defined risk trade here, as we've seen this stock bounce from this level a few times, and if it does, I'll likely have the ability to buy back the short put spread for less than the $205 credit I receive up front for taking the risk.
Rivian Automotive is set to report quarterly earnings on November 7, 2023 after the market closes, which falls within the expiration cycle of this options trade.
Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb
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