Trader Turns $16,000 Into $1 Million in Hours With RIVN Call Options

by

As an analyst with a background in financial markets and experience in following the electric vehicle industry, I find this situation surrounding Rivian Automotive (RIVN) intriguing. The sudden surge in stock price after Volkswagen’s investment announcement is not unusual, but the large call option trades beforehand raise concerns.

On Wednesday, prior to the market opening, Rivian Automotive (RIVN) shares experienced a significant jump of nearly 50%, igniting excitement among electric vehicle (EV) investors. The catalyst for this surge was Volkswagen’s announcement that it planned to invest up to $5 billion in Rivian. This unexpected news resulted in a remarkable transformation: a trader successfully turned an initial investment of $16,000 into over $1 million within hours.

Based on Unusual Whales’ disclosed data, a solitary investor bought a significant quantity of $14 and $13 call options for RIVN with an expiration date of June 28th. These contracts allow the owner to acquire Rivian stock at a predetermined price prior to the expiry. The transaction’s timing has piqued interest, leading some to speculate that the buyer might have had exclusive, non-public knowledge about the company. This conjecture arises due to the trader’s $16,000 wager on call options transforming into over $1 million following Volkswagen’s investment declaration.

I recently came across some significant options contracts for Rivian (symbol: $RIVN). Specifically, there were two contracts: one with a strike price of $14 and an expiration date on June 28, 2024, and another with a strike price of $13 and the same expiration date.

— unusual_whales (@unusual_whales) June 26, 2024

As a researcher examining the financial markets, I’ve observed that the pre-market surge has added significant stress to short sellers. These investors had wagered on Rivian’s stock price declining due to the company’s reported losses – according to The New York Times, Rivian has been losing tens of thousands of dollars on every vehicle sold. Furthermore, some analysts harbor doubts about the company’s ability to attain profitability without the Volkswagen deal.

Approximately 18.85% of the stock’s float is held by short sellers, and they’ve had an average holding period of about 4 days. As reported by Fintel, this high short interest and brief holding duration may have compelled many short sellers to exit their positions at a loss.

With a significant number of investors betting against this stock and prices quickly climbing, there’s a risk of a short squeeze occurring. In such a scenario, short sellers would be compelled to purchase shares to close their positions, thereby fueling additional price increases.

It’s not unusual in the world of cryptocurrencies for individuals to make significant profits from similar trades. For instance, CryptoGlobe recently disclosed information about an anonymous trader who transformed a $1,200 investment into almost $1 million within three hours by purchasing a newly launched cryptocurrency and distributing it among four different wallets, acquiring 19% of the digital asset’s entire supply.

Read More

2024-06-26 20:19