Penny Stocks With Unusual Options Activity
Like the Federal Reserve’s stance on raising rates, trading stocks can also be heavily data-dependent. Can you find penny stocks to buy based on momentum or social sentiment? Of course, but that might not be as detailed as other ways to research potential trades. Most recently, small groups of investors are picking apart alternative data sets. Things like insider filings, hedge fund reports, and, as we look today, unusual activity in derivatives.
This article looks at a handful of companies that have experienced an uptick in options trading action. Unlike popular opinion suggests, penny stocks are more than the “no-name” or “fly-by-night” companies that movies make them out to be.
Thanks to the 2022 stock market crash, even more, penny stocks now have notable company names behind them. PartyCity, Wish, SmileDirectClub, the list goes on as far as household names go. The best part is that all of these cheap stocks have options and that options data can be used to gauge specific sentiment.
Generally speaking, unusually high levels of Call buying or Put buying send a message to retail traders. That message is usually something related to “whale trades” or “hidden sentiment.” More Call buying than Put buying sends a bullish tone to those using options flow data.
The opposite is true for Put buying. While there’s no guarantee that a stock with either case will explode or drop, the data can be used in tandem with many other factors when putting your plan together.
Penny Stocks To Watch This Week
- Bed Bath And Beyond (NASDAQ: BBBY)
- Kinross Gold Corp. (NYSE: KGC)
- Redfin Corporation (NASDAQ: RDFN)
- Growgeneration Corp. (NASDAQ: GRWG)
Bed Bath And Beyond (NASDAQ: BBBY)
Meme stocks have been one of the popular choices for retail traders in the stock market this year. Bed Bath And Beyond has been in and out of favor over the last few months, thanks to a mix of high short interest, speculation, and general hype. Clearly, the most significant period for BBBY stock was back in August. But that hasn’t stopped traders from following daily trends.
Upcoming earnings have been one of the centerpieces of speculation recently. Mixed results have brought significant volatility to the retail space. There’s also the rapidly approaching holiday season that is sure to impact certain retail companies. This action has played a role in sympathy sentiment throughout the early part of November.
[Read More] What to Look For in Penny Stocks Under $1, 3 TipsAre traders betting bigger on BBBY stock right now? If we look at the options market in Bed Bath & Beyond, you’ll see some unusual activity in the January 20, 2023, Calls. Today’s volume is already outpacing open interest. Meanwhile, as far as today’s Put volume is concerned, not much has happened in comparison. Now, it should be mentioned that overall, Put open interest is significantly higher for this specific expiration date. But if you’re only looking at today’s trend, it may be leaning more bullish in light of the Call volume.
Kinross Gold Corp. (NYSE: KGC)
Safe haven investments have returned to favor thanks to record inflation and the potential for a recession. As discussed yesterday, in an article about penny stocks under $1, the market weighed Fed Chair Powell’s comments more than the initial FOMC statement, slightly dovish than some initially expected.
Powell quickly stopped the optimism that briefly ensued after the November Fed Meeting at the 2:30 PM ET press conference. The bleaker economic outlook has resulted in some taking a more conservative approach to investing, which means looking for hard assets.
Gold mining stocks and other precious metal miners are getting some attention in the stock market this week. This is where companies like Kinross Gold Corp. have gained momentum. There’s no glitz and glamour of being a meme stock. However, the gold miner has enjoyed a strong push higher over the last few days. The anticipation of Kinross’ upcoming earnings is adding to some speculation in the stock market today. The company releases its third-quarter financial results after the market closes on November 9th.
In its last earnings report, the company missed analyst estimates but said it was on track to “significantly increase” production in the year’s second half. With this backdrop, it’s sure to be something the market looks for details on this week.
Where is the options chain pointing right now? Today there is some deep in-the-money Call activity for the $3.50 strike in the December 9, 2022 expiration contracts. At the time of this article, there were only four contracts of open interest compared to more than 5,000 contracts traded today.
Redfin Corporation (NASDAQ: RDFN)
While the housing market has been hit hard recently, Redfin seems to have attracted some underlying bullishness based on its options chain. In particular, the January 20, 2023, $4 Calls are the options gaining the most “unusual” interest. There were 315 contracts of Open Interest compared to more than 4,600 traded at the time of this article.
Meanwhile, RDFN stock is still trying to rebound from new 52-week lows that were reached on Monday. As earnings are approaching, the market continues weighing the state of the housing industry. A recent report from Redfin cited 29% of U.S. single-family homes for sale in the third quarter were new construction. According to the report, this was the highest share of any third quarter on record.
Faith Floyd, a Redfin real estate agent in Houston, explained, “Builders are giving away everything but the kitchen sink to attract bidders. Many are offering to buy down the buyer’s mortgage rate by 1.5 points, and I’ve seen at least one offer a $10,000 check for closing costs, a $3,000 gift card, and a free fridge. This one way builders will dig themselves out of the hole they’re in.”
As earnings approach, some bullishness in the options market seems to have attracted a bit more attention from traders this week.
Growgeneration Corp. (NASDAQ: GRWG)
Earnings are the reason that GrowGeneration stock is trading higher. In cases like this, where the stock has gapped significantly, there’s always a risk for profit-taking to impact the bull rally. As of this article, GRWG stock is pushing higher at the $4.40 level.
[Read More] 7 Cheap Penny Stocks To Buy For Under $1 Right NowThe company released earnings after Monday’s closing bell, which have resonated with the market. The hydroponic and organic garden store saw net sales of $71 million, exceeding internal expectations. Meanwhile, GrowGeneration raised its 2022 outlook to a revenue range of $270 million to $280 million.
“We remain cautiously optimistic on the broader industry as a whole and are seeing some early signs of stabilization…We remain committed to right-sizing the business, and we’re hyper-focused on our strategic initiatives, including new market expansion efforts, that remain a key priority.”
Darren Lampert, GrowGeneration’s Co-Founder and Chief Executive Officer,
Are “whales” betting on GRWG stock right now? It may or may not be a short-term focus, and I say that because the bulk of the unusual activity is in this week’s expiration Call options. Nevertheless, if GRWG stock is on your list, it may be worth noting that the November 11, 2022, $4.50 Calls have gotten the most activity today.
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