Everyone wants an edge when it comes to finding the best penny stocks to buy. But what are ways to accomplish this? You could look for high-volume penny stocks, penny stocks with insider buying, or even take a peek at what Redditors are talking about. But we’ve seen a notable trend emerge among retail traders looking for an edge. Believe it or not, they’re looking at the options market for clues regarding “big money” sentiment. Today we’ll take a closer look at a handful of companies that appear to have some “unusual” options activity right now.
Penny Stocks With Unusual Options Activity
- Veon Ltd. (NASDAQ: VEON)
- Mullen Automotive Inc. (NASDAQ: MULN)
- Tellurian Inc. (NYSE: TELL)
- Geron Corp. (NASDAQ: GERN)
- Shift Technologies (NASDAQ: SFT)
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When we talk about unusual options activity, understand that it isn’t a suggestion to buy or sell any stocks mentioned. Our goal is to identify interesting data and then translate that into useful information that you can then make one small piece of your entire due diligence process. Much like insider trading, however, some traders use irregularities in the options market to suggest sentiment. Is there a large number of Call options buying volume compared to open interest? Are there an unusual amount of Puts that traders have scooped up? Depending on the type of volume and whether it is buying or selling to open the trade, specific traders have identified new opportunities.
Veon Ltd. (NASDAQ: VEON)
Thanks to the Russia-Ukraine conflict, shares of Veon Ltd. were pummeled by selling over the last month. What was the problem? Veon announced a “RUB 30 billion” seven-year term loan with VTB Bank (a Russian Bank) earlier this quarter. That was valued at roughly $400 million at the time of the announcement (Feb. 17). The Russian financial market has faced mounting pressures and deteriorating conditions since the Ukraine invasion began. Giving some perspective, 1 RUB is worth $0.0095 USD right now. In the face of this, uncertainty began driving VEON stock’s direction in the market.
Fast-forward and clarity was brought, informing traders on the financial state of Veon, which ultimately brought optimism back to the tech company: “As at 27 February 2022, VEON had approximately USD 2.1 billion of cash and deposits, including USD 1.5 billion of USD and EUR denominated cash and deposits held at the level of its headquarters (“HQ”) in Amsterdam. The HQ cash and deposits are held in bank accounts, money market funds, and on-demand deposits at a diversified group of international banks from the European Union, the United States, and Japan,”
VEON Stock & Unusual Options Activty
The May 20, 2022, $1 strike Call options are of particular interest. Heading into the Friday session, the Open Interest sat at 141 contracts. As of this article, that figure is well-above 2,000 contracts.
Mullen Automotive Inc. (NASDAQ: MULN)
EV company Mullen Automotive has been one of the hottest penny stocks to watch in March. We’ve also had a chance to report on it since the end of February. Mullen is currently testing solid-state polymer cells with evidence that they have the potential for a 150-kilowatt-hour battery pack delivering 600+ mile range.
Thanks to the attention on EV and cheap penny stocks, MULN has significantly benefited from a surge of retail interest. It’s also worth mentioning that the penny stock has experienced waves of unusual options activity for weeks. But the latest trend may suggest something a bit different as far as sentiment is concerned.
MULN Stock & Unusual Options Activty
There’s a mix of both unusual Put and Call options trading today. In particular, the April contract expiration has begun gaining some momentum. Right now, the $2.50 strike Calls and $1 strike Puts have shown the highest Open Interest.
Tellurian Inc. (NYSE: TELL)
Today, energy stocks remain red hot in the stock market, and it looks like traders remain optimistic. Tellurian is filling the void for current and future energy requirements, especially in light of the move toward carbon neutrality globally.
The company specializes in liquified natural gas production. This year could be an interesting one for the company considering what could come as soon as next month. CEO Octavio Simoes explained in a February release, “Tellurian is optimally positioned with fully executed market-based LNG SPAs and a permitted project. Bechtel will begin construction of Driftwood LNG in April, and we will seek to conclude the financing process shortly thereafter.”
TELL Stock & Unusual Options Activty
What has the options market seen in TELL stock today? We look at the May 20, 2022 expiration date for this information. TELL stock’s $4.50 strike Call options have shown exciting activity. Coming into the day, 43 contracts were listed as open interest. However, more than 19,900 contracts were traded during the session as of this article. Meanwhile, the Put side of the options chain showed very little open interest for the same expiration date.
Geron Corp. (NASDAQ: GERN)
Popular biotech stock Geron Corp. has caught a strong surge in bullish trading activity at the end of the week. It specializes in treatment development for immune diseases. Its imetelstat platform currently targets hematologic malignancies and is in 2 Phase 3 trials, IMerge and IMpactMF in myelodysplastic syndromes and refractory myelofibrosis, respectively.
In a recent corporate update this month, the company discussed its outlook for the company. CEO John A. Scarlett explained, “With completion of enrollment in IMerge Phase 3 last October, we look forward to top-line results from that trial in early January 2023 . If those results confirm similar safety, as well as the depth, breadth and durability of transfusion independence that was observed in our Phase 2 trial, then upon approval of an NDA, we expect our U.S. commercial launch of imetelstat in lower risk MDS to occur as early as the first half of 2024.”
The options market seems to think highly of these latest developments, as we’ll discuss next.
GERN Stock & Unusual Options Activty
Overall, options volume and open interest are pretty low for GERN stock compared to others on this list. That also makes today’s data unique. In particular, the September 16, 2022 expiration date is in question. The $1.50 strike Calls, specifically, show 536 contracts listed as open interest but 5,000 contacts traded on Friday, as of this article. The largest trade of the day was in these contracts for a sum of 4,975 at $0.17 for the $1.50 Calls.
Shift Technologies (NASDAQ: SFT)
Finally, Shift Technologies joins this list of penny stocks after some interesting options activity sparked attention. The company is involved in the automotive e-commerce industry. Earlier this month, Shift announced a new acquisition that will Fair Technologies’ marketplace platform. This move, according to Shift CEO George Arison, “enables consumers to shop a deep inventory of cars from dealer partners, get approved for financing from a network of in-platform lenders, and sign for the one they want 100% digitally,” and is “the ideal solution for dealers to participate strategically in e-commerce, grow market share and develop long-term relationships with customers.”
In addition, the company entered into a commitment letter with SoftBank Group to fund this deal through senior note purchases.
SFT Stock & Unusual Options Activty
The April 14 expiration Call options are in focus today. In particular, the $5 strikes have seen an uptick in volume compared to open interest. Whether or not this is a sign of bullish sentiment is to be seen. However, in light of the latest update involving the new acquisition and support from SoftBank, SFT has been one of the penny stocks to watch right now.
Options Risk & Reward
The rewards are clear, but the risks can be immense. Since prices fluctuate, implied volatility changes, and time decay plays a role (all things we’ll discuss in an Options 101 article), the option’s value can fluctuate rapidly. This is why only specific traders with plenty of education in trading options choose to jump into these wild waters.