We’re bringing a new feature to the penny stocks feed by discussing stocks under $5 with unusual options activity. If you don’t trade options, it may still be good to know about unusual trading for a few reasons. Other than observing the entire ‘chessboard,’ some traders also use this to gauge interest. There aren’t any guarantees, but in general, when heavy or unusual trading happens in calls or puts, it can spark sentiment-driven trends. Similar to penny stocks with insider trading, options flow has been used to find stocks with a bullish or bearish sentiment.
Today we look at a handful of penny stocks with unusual options activity, which options are seeing this trend, and what the companies have been up to lately. This is also a continuation of our previous list of penny stocks discussed in our article: Hot Penny Stocks To Buy For Under $5 With Unusual Options Activity. I’ll provide you with the complete list at the end of this article.
Penny Stocks With Unusual Options Activty
- Quantum-Si Inc. (NASDAQ: QSI)
- Applied Optoelectronics Inc. (NASDAQ: AAOI)
- Zymergen Inc. (NASDAQ: ZY)
- Buzzfeed Inc. (NASDAQ: BZFD)
Quantum-Si Inc. (NASDAQ: QSI)
If you’ve been following the story about Cathie Wood this week, Quantum-Si might have been a name you came across. In an interview with CNBC, Wood reinforced her stance on the ARK investment strategy. Even in light of massive losses, the fund managed explained, “We’ve had a significant decline…we do believe innovation is in the bargain basement territory.”
While her 5+-year time horizon will undoubtedly get put to the test, that has reignited a focus on “Cathie Wood stocks” in the market this week. Earlier this month, we dove into some of Wood’s funds and found several companies trading in the penny stock range. Quantum-Si is one of them. At the time, we noted Cathie Wood’s ARK Genomic Revolution ETF has already established a position. Today, the firm shows 11.456 million shares were held, which equates to 1.21% of the ETF’s holdings. This is lower than the level a few weeks ago where ARKG had 11.585 million, equating to 1.26% of the ETF’s weighting.
Quantum-Si focuses on developing protein sequencing platforms. Its suite of technologies is based on its semiconductor chip created to allow for digitized proteomics research in drug discovery and diagnostics. Some unusual options activity hit the tape ahead of a March 8th presentation at the Cowen Health Care Conference. Specifically, the March 18th $5 strike Calls are of interest. The volume on February 18th registers at more than 2,100 contracts, which is much higher than the open interest of just 132 contracts.
Applied Optoelectronics (NASDAQ: AAOI)
Applied Optoelectronics is a “repeat offender” on the list of stocks with unusual options activity. Earlier this month, we discussed how the March 18th, 2022 $5 strike call options were in focus. Open Interest sat at 2,869 as of the article, and 956 contracts were added into the mix. Furthermore, the options chain for this expiration showed a heavier weighting of Open Interest in AAOI calls for the $5 and the $7.50 strikes.
So, where does that sit today? The same contracts remain in focus as another 1,316 contracts traded in the March 18th $5 strike Call options. Open interest is also higher at 4,022 as of this article. One of the points of interest for the optical network laser company is the company’s upcoming earnings report. Next Thursday (2/24), Applied delivers its Q4 and full-year earnings for 2021.
As discussed earlier this month, the market may be looking for more details based on its last earnings. CEO Dr. Thompson Lin explained how component shortages played a role and “is expected to continue to be a factor in the fourth quarter, but we believe the demand drivers remain favorable for us and anticipate easing of these supply constraints in the future.”
Zymergen Inc. (NASDAQ: ZY)
Shares of Zymergen have been under constant pressure since last summer. The penny stock plummeted from over $35 after reporting that issues with its commercial product pipeline would ultimately affect its delivery timeline and revenue outlook. CEO Jay Flatley expressed his disappointment and said, “the Board and management team are focused on resolving the underlying issues to ensure Zymergen moves forward as a stronger company with a compelling operating plan.”
Believe it or not, Zymergen is another one of the Cathie Wood penny stocks on this list. Her Ark Genomic Revolution ETF has 0.34% of its weight in ZY stock. In total, ARKG lists just over 3.16 million shares in the fund as of today’s date. Earlier this year, the company launched its drug discovery unit to identify natural products and molecules for targeting certain cancers.
Devin Scannell, VP of Innovation, said in a January update, “Whether for targeted protein degradation or traditional inhibitors, scientists are looking for access to new chemical space…In addition to extensive chemical novelty, the amount of optimization required to achieve drug-like properties for such molecules can be significantly less than for purely synthetic compounds.”
Some unusual activity in ZY stock’s options chain was observed heading into the long weekend. In this case, the Jun 17th, 2022 $7.50 Calls saw over 2,000 contracts traded on Friday. This compared to just 1,057 contracts listed under Open Interest. More unusual activity was observed in the June 17th $5 Calls with Volume out trading Open Interest by more than 2:1.
Buzzfeed Inc. (NASDAQ: BZFD)
The popular media company Buzzfeed has come under pressure since making its public debut late last year. Following IPO highs of $14.77, BZFD stock has belly-flopped ever since. Buzzfeed stock has treaded water below $5 for the better part of the last month, thanks to muted sentiment in the stock. Analysts seem to have a luke-warm sentiment in the stock, B of A Securities is the most recent firm to weigh in, and it has a Neutral rating paired with a $5 price target.
Buzzfeed has been beefing up its leadership team during the early part of the year. A new COO, Christian Baesler, joined the executive team last month. He’s also the current CEO of Complex Networks, which Buzzfeed acquired at the end of 2021. Baesler explained that he is “confident that these changes will help accelerate the integration of Complex Networks into BuzzFeed’s business model, unlocking its potential for growth. Edgar, Ken, Nilla, and Richard are true, accomplished professionals, and I can’t wait to hit the ground running together.”
This was even in light of the overall stock performance of BZFD shares at the time. Now the market might be looking ahead as a new round of earnings is due next month. If it’s one of the names on your list of penny stocks, keep March 22nd in mind. Meanwhile, some interesting options activity has gone on for the March 18th Calls. Specifically, over 2,600 contracts traded in the 3/18/22 $6 strike calls compared to just 291 contracts listed under open interest. Considering earnings are the following week, it will be interesting to see what happens next on the options front.
Options, Penny Stocks, Risk & Reward
The rewards are clear, but the risks can be immense. Since prices fluctuate, implied volatility changes, and time decay plays a role (for more info, check out Trading Options 101), the option’s value can fluctuate rapidly. This is why only certain traders with plenty of education in trading options choose to jump into these wild waters. So how do penny stocks play a role? Believe it or not, there are more than just a few penny stocks with options. Here’s the complete list that carried over from our original article: Hot Penny Stocks To Buy For Under $5 With Unusual Options Activity.
- Quantum-Si Inc. (NASDAQ: QSI)
- Applied Optoelectronics Inc. (NASDAQ: AAOI)
- Zymergen Inc. (NASDAQ: ZY)
- Buzzfeed Inc. (NASDAQ: BZFD)
- Eos Energy Enterprises Inc. (NASDAQ: EOSE)
- Ouster Inc. (NYSE: OUST)
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