Penny stocks are well known for the higher levels of risk involved in trading them. They’re also known for offering some of the most significant potential rewards. Due to their lower price and generally lower liquidity, these assets can move quickly in high and low volume environments. But something that isn’t commonly discussed when talking about penny stocks to buy is options contracts.
Usually, these derivatives are sought out by traders to speculate on higher-priced stocks for lower capital requirements. Want to control 100 shares of Tesla (NASDAQ: TSLA)? Instead of spending $70,000, you could purchase one options contract for around $1,200. That gives you the right to buy or sell 100 shares of Tesla by a specific expiration date and strike price without breaking the bank.
In many cases, traders will look at options activity to try and find underlying flow and potential “bets” on directional moves. Generally speaking, if there is a large flow of call option buying, some traders speculate that a bullish trend could be en route. The same goes for unusual put options volume.
Ultimately, it’s all speculative, and not a sure thing such a move is coming. Given this strategy, however, we took a look at a handful of penny stocks and found several with unusual options activity while the stock market is down today. Is it time to buy the dip with the Ukraine invasion, or should you avoid these entirely?
Penny Stocks To Buy [or avoid]
- Offerpad Solutions Inc. (NYSE: OPAD)
- Canaan Inc. (NASDAQ: CAN)
- Dave Inc. (NASDAQ: DAVE)
- Hims & Hers Health Inc. (NYSE: HIMS)
1. Offerpad Solutions Inc. (NYSE: OPAD)
Real estate platform company Offerpad has also jumped on the heels of recent earnings results. Its platform enables users to buy and sell residential real estate, and thanks to the surge in real estate spending last year, earnings were strong.
Offerpad reported a 95% jump in full-year revenue to $2.07 billion; it also posted a positive net income and adjusted EBITDA. Compared to the previous year’s fourth quarter, Offerpad saw revenue increase by 289%, with gross profit climbing 178%. Thanks to the blowout quarter, management also appears exceedingly optimistic heading into the new year even in current market uncertainty.
CEO Brian Bair said, “We’re excited to build on our positive momentum in 2022 with the continuing strength of the residential real estate market, increasing consumer adoption, and our industry-leading operational execution.”
Offerpad expects to sell 3,000-3,150 homes with revenue coming in between $1.1 billion to $1.15 billion.
OPAD Stock Unusual Options Activity
Today, some unusual volume came into the July 15th $5 OPAD Calls. The open interest heading into Thursday’s session stood at 754 contracts. However, at the time of this article, more than 2,400 had traded.
2. Canaan Inc. (NASDAQ: CAN)
Cryptocurrencies have been just as depressed as stocks. The price of Bitcoin once again tested the $34,000 level on Thursday, while Ethereum dipped to $2,300 for the second time in the last 30 days. Fears over the resulting impact of the Ukraine invasion have investors on the edge of their seats. Typically seen as the safe haven of the new millennium, cryptocurrencies haven’t responded as well to wartime speculation as traditional precious metals. Even with this case, that doesn’t mean cryptocurrencies are dead. Many are looking for dip opportunities in major cryptos like Bitcoin and Ethereum.
The big question is will this extend into stocks? So far, the bounce has been muted as investors digest the Russia-Ukraine data. But several companies, including Canaan, have seen some underlying bullish sentiment. In particular, Canaan focuses on ASIC chip design and development and offers software services. It has been expanding its mining operations and mining machine development this year, which included more extensive collaboration with multiple mining farms for joint-mining businesses in Kazakhstan last month.
CAN Stock Unusual Options Activity
In March, CAN stock could also find itself on watch lists as it reports earnings on the 3rd. The options flow also shows some interesting activity in the options chain. Today, over 6,200 contracts were traded at the $7.50 strike price for the March 18th expiration. There are also over 11,000 contracts shown for open interest.
3. Dave Inc. (NASDAQ: DAVE)
Fintech, like cryptocurrency, has emerged with new popularity this year. Whether we’re talking about digital wallets, currencies, or B2B transaction platforms, companies within this industry have sparked attention in the market. Dave Inc. builds products that “level the financial playing field,” targeting retail users. Its platform offers financial tools for spending management, banking, and building credit.
As one of the former SPAC merger candidates, DAVE stock has performed similarly to most in this new niche, an early jump around the IPO followed by a rapid drop to new lows. At one point, shares of DAVE traded as high as $15.35 this year. A recent share-selling update helped tip the scales as the penny stock dipped to record lows this week. Is all lost for DAVE?
DAVE Stock Unusual Options Activity
If you look at the options flow, it might start to make you think. Right now, the action in the May 20 exp. Calls has turned some heads. While most of the open interest is at the $7.5, $10, and $12.50 strikes, volume of more than 3,000 contracts has already come into the $5 strike today. Considering the open interest on the option is below 100 contracts as of right now, it came as an “unusual options activity” event. Also, there is barely any open interest for DAVE put options for the May 20th expiration.
4. Hims & Hers Health Inc. (NYSE: HIMS)
Another popular stock that has fallen like a rock since its IPO is Hims & Hers. But, thanks to that drop, we can down discuss it as a penny stock. The company’s model focuses on telehealth and servicing customers for conditions related to primary care, sexual health, mental health, and even dermatology.
Hims & Hers reported its latest earnings results this week, giving investors some idea of the company’s current standings. Sales beat estimates in the fourth quarter; however, earnings per share showed a big miss. Wall Street analysts expected a loss per share of $0.07 while the actual figure was more than double. Needless to say, 83% revenue growth year-over-year in addition to 95% ending member subscription growth helped bring a bit of upbeat sentiment to HIMS stock.
HIMS Stock Unusual Options Activity
Looking at the current options flow for HIMS stock, we see that “unusual activity triggered in the December contacts. Specifically, the $10 Calls expiring December 16th caught a boost in volume. More than 1,200 contracts traded compared to just 518 in open interest.
Penny Stocks To Buy Right Now? Understanding Options Flow
Looking for unusual options activity has become another way of determining sentiment. In many cases, the activity can occur at expiration dates around essential periods for companies. It isn’t always the case, but at the very least, it may be worth taking a closer look at the outlook for a company and seeing if anything is planned in the weeks or months ahead.
The “unusual” or “irregular” activity can give you an idea about the events traders have speculated on. Today, we talked about a few stocks with unusual options activity. Now, your decision comes down to whether or not the speculation carries weight.