Rivian Tanks Over 17% While Option Volume Explodes

What Happened: Rivian Automotive RIVN which was up almost 80% over the last four sessions, is down big Wednesday, trading over 52 million shares.

But what is impressive is the total amount of options traded on the day, which is well over 292,000 options (image below).

The reason why the large amount of option trades on the day is impressive is that before today, there were roughly 130,000 total options on the stock. Hence today's 292,000+ options represents a 220% increase in one day.

Why It Matters: Rarely will you see the total options in one day surpass the total options available. This means option traders have been aggressively trading this stock during the session.

However, it should be noted Rivian only started trading options this week, thus there hasn't been a lot of time for option traders to establish options over various strikes and expiries.

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Prior to Wednesday, about 75% of the options were short dated (expiring Friday), which is approximately 97,000 options. However, after today's splurge on options, traders have added roughly 180,000 more options set to expire Friday. This means 61% of the options traded today are short dated.

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What's Next: The number of calls and puts traded today is relatively even (147,000 versus 145,000). This is less likely due to the market having mixed bullish/bearish views, and more likely due to the high implied volatility with the ATM (at-the-money) calls and puts for the Nov. 19 expiry showing an IV of 165%.

High implied volatility creates higher premiums for option traders to take advantage of, so there is likely some puts being sold versus traders getting long puts.

The largest strikes by volume on the put side are the $140 strike and the call side the $150 strike. Due to the extensive amount of options expiring Friday, it seems less likely prices get back to the weekly highs around $180 since all those options will need to be monetized.

If that scenario plays out, there is little short-term option support below the $140 strike. This means puts would be in control, and below the $140 strike, the next largest strike by volume is the $130 strike, which could be the next downside target if the $140 level folds.