Rivian Automotive, Inc. (RIVN), Trending Stock Report

Rivian Automotive, Inc. (RIVN) is trending in the news after announcing that Volkswagon AG (VWAG.Y) has increased its spending on its partnership with the EV automaker to $5.8 billion. With the deal, VWAG.Y gets rights to RIVN software and technology, while RIVN gets cash and greater economy of scale. RIVN has struggled to sell vehicles for a profit because the cost to build their vehicles is too high. The greater economy of scale may be exactly what RIVN needs. Social media mentions are up 127% in the last 24 hours as retail investors digest the news.

From an options trader’s point of view, RIVN shares are trading flat, and volatility expectations are low after its recent earnings report. In fact, volatility expectations may be too low, and that means we have an option buying situation.

This Volatility Term Structure chart for RIVN shows that volatility expectations for late November through January are low relative to other expirations. The lowest volatility expectations at the end of November and December don’t have the liquidity of the January 17^th options. So, we’ll focus on the January monthly expiration.

This MDM graph compares the modeled expected distribution for future stock prices (the orange line) with the actual distribution of RIVN’s share prices over the past 3 years (the blue histogram). You can see that the actual stock movement tends to make big moves more frequently than the current options prices expect. This graph tells us that January 17^th options are relatively inexpensive.

This Volatility Cone chart for RIVN compares implied volatility expectations for each term to the historical volatility for that same term. The blue line shows the average historical volatility; purple lines show each HV measure’s highest high and lowest low over the past 3 years. You can see that all terms are below average. This graph confirms that RIVN options are cheap relative to the historical behavior of the stock.

RIVN is trending in the news after announcing a greater investment from partner VWAG.Y. The stock has been trading flat recently and the increased cash to RIVN may be just what the company needs right now. If RIVN can reduce its cost to build EVs the stock could launch in the next few weeks. If not, the stock could drop. With volatility expectations so low, it makes sense to buy options on RIVN today.

To get the specific details and prices on today’s trade ideas, be sure to read today’s ODDS Online Daily Option Trade Idea.