After a big slide, one big options trader is looking for a rebound in Nikola.
Large blocks of calls changed hands yesterday in the electric-truck developer. A block of 40,000 July 5.50 calls were bought for $0.22. The investor sold a matching number of July 6.50 calls for $0.05. Volume was more than 50 times open interest at both strikes, which suggests he or she opened a new vertical spread.
Calls fix the price where a security can be purchased. Investors can buy them to position for a rally and sell them to collect premium. They can also combine them in a spread to leverage a move between two levels, as happened on Wednesday.
The position cost a net $0.17 to open. It will expand to $1 if RIVN closes at $6.50 on expiration, a potential gain of 488 percent from the shares climbing 25 percent. It will also expire worthless if the stock closes under $6.50.
A 8-July 5.50 calls also traded for $0.09, but volume was below open interest. That may suggest the investor exited a position in the shorter-term contracts and extended their position by one week, obtaining more time for a potential rally.
NKLA fell 0.20 percent to $5.18 yesterday, and has lost about two-third of its value in the last year. The company has yet to generate significant revenue, but is developing tractor trailers powered by batteries and hydrogen.
The timing of Wednesday’s option trade is potentially significant because NKLA’s management wants investors to approve increasing the number of shares by one-third. The deadline is July 17 — two days after the call spread expires.
Overall options volume was 4 times the monthly average, according to TradeStation data. Calls accounted for 99 percent of the total.
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