Well-timed Rivian options trades ahead of Volkswagen investment raise eyebrows

By Joseph Adinolfi

Did somebody just get lucky?

A handful of well-timed trades in bullish call options tied to Rivian Automotive Inc. (RIVN) caught the attention of investors and analysts on social media this week.

The trades landed shortly before the fledgling electric vehicle company announced on Tuesday afternoon that it had struck a deal for an investment from German automotive giant Volkswagen AG (XE:VOW3).

According to the terms, Volkswagen would invest $1 billion in Rivian, potentially followed by another $4 billion if a planned joint venture gets off the ground, as MarketWatch reported. News of the investment helped assuage investors' concerns about the pace of Rivian's cash burn, and sent the company's shares soaring as much as 50% in afterhours trading on Tuesday.

While these gains had eased by the time Wall Street opened on Wednesday, shares of the electric vehicle maker still finished 23.2% higher at $14.74, according to FactSet data.

On Tuesday, orders hit the tape for blocks of Rivian calls expiring Friday with strike prices of $13 and $14. A trader or traders purchased a little over 4,000 contracts of each at prices of 12 cents and 5 cents, respectively, according to FactSet options data.

Options prices reflect the cost per share, with each contract controlling 100 shares. So the total cost to the trader would be $12 per contract, or about $48,000 total for the $13-strike calls, and $5 per contract, or about $20,000, for the $14-strike calls.

By the time markets opened on Wednesday, these calls would have yielded substantial profits. Prices had skyrocketed to $3.25 for the formerly 5-cent calls, and about $2.40 for the formerly 12-cent calls. That would have translated to an on-paper profit of more than $2 million.

"Those were definitely some hefty and conveniently timed trades," said Bret Kenwell, U.S. investment and options analyst at eToro, in comments shared with MarketWatch via email.

To be sure, it is impossible to say whether these traders had advance knowledge of the deal based on the information available, but bets on out-of-the-money options with just a few days left in their lifespan are fairly uncommon, Kenwell said.

"It's hard to find a smoking gun," said Steve Sosnick, chief market strategist at Interactive Brokers, told MarketWatch via email.

A request for comment sent to Rivian from MarketWatch wasn't returned. The company is holding an investor day on Thursday.

-Joseph Adinolfi

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06-27-24 0838ET

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