How do you find the best or hot penny stocks to buy in the stock market today? You could follow trends on social media and monitor discussions in the Fintwit community. You could also take time and sift through hundreds of financial statements to find the “perfect” penny stocks with solid earnings and high dividends. However, what some traders are doing right now is something a bit different from the norm. They’re looking at options. Some traders will identify specific options activity as “whale activity” in stocks. Today we look at 8 penny stocks with unusual options activity to buy for under $5 in March.
Hot Penny Stocks To Watch
- Hycroft Mining Holding Corp. (NASDAQ: HYMC)
- Ring Energy (NYSE: REI)
- Sundial Growers (NASDAQ: SNDL)
- Takung Art (NASDAQ: TKAT)
- Vroom Inc. (NASDAQ: VRM)
- iQIYI Inc. (NASDAQ: IQ)
- W&T Offshore Inc. (NYSE: WTI)
- Limelight Networks (NASDAQ: LLNW)
Best Penny Stocks To Watch, March 2022
The simple breakdown of “whale watching” is that when options are bought or sold, investors are placing a “bet” that stocks will move in one direction or another. It might seem like a viable trade thesis, and because one contract equates to 100 shares of stock, a large options trade might mean a large bet on the underlying company’s next move. But keep in mind that if you’re looking for the best penny stocks to watch based on options flow, learn the basics of trading options first. Like stocks, you can “short” or “sell to open” a trade.
Therefore, selling a Call could be a bet that stock prices will drop. There are also advanced options techniques to focus on income generation more than anything else. The point is, once you identify your options activity, additional research is warranted to get a better understanding of what it actually means in the long run. With today’s list of penny stocks, does this unusual options activity suggest bullish or bearish sentiment in the stock market today?
1. Hycroft Mining Holding Corp. (NASDAQ: HYMC)
Unless you don’t actively trade, you’re familiar with the Hycroft saga in the stock market this month. The mining company’s shares came into focus after the most unlikely investor put money into HYMC stock. AMC Entertainment (NYSE: AMC), one of the leading meme stocks, along with famed mining investor Eric Sprott invested a total of roughly $56 million into Hycroft (See “AMC Entertainment (AMC) Sees Golden Opportunity In Penny Stocks,” for the full details of this deal).
This investment helped bring much more attention to the penny stock and, in turn, the outlook on the company. AMC CEO Adam Aron explained, “Our strategic investment being announced today is the result of our having identified a company in an unrelated industry that appears to be just like AMC of a year ago. It, too, has rock-solid assets, but for a variety of reasons, it has been facing a severe and immediate liquidity issue. Its share price has been knocked low as a result…Independent third-party studies confirm that the 71,000 acre Hycroft Mine in northern Nevada has some 15 million ounces of gold resources and some 600 million ounces of silver resources.”
The options market for HYMC stock has been red hot since the AMC news, but no contracts have been hotter than the April 14th $2.50 Calls. As of today, there are more than 27,000 contracts of open interest. Meanwhile, Thursday’s volume was over 10,000 contracts.
2. Ring Energy (NYSE: REI)
Thanks to the Russia-Ukraine conflict, the global energy markets have experienced strong surges in price. Ring Energy is an oil and gas exploration, and production company focused on building up its assets in the Permian Basin. Last year it saw its sales volumes for Q4 jump to 9,153 barrels of oil equivalent per day, up 11% from Q3. Meanwhile, revenues came in at more than $59.6 million for the quarter, beating Wall Street estimates by over $10 million. With the initiation of its 2022 drilling program in January and the goal of drilling and completing 25-33 wells this year, Ring expects this year to become a strong year for the company.
How are “bets” being placed on REI stock right now? Look at the options chain for Ring Energy today. While there is plenty of open interest and volume in the REI April 14 $4 calls, the May 20, 2022, $4 are in focus. That’s because going into the session, open interest sat at 2,255. However, the option’s volume is more than 14,000 contracts today.
3. Sundial Growers (NASDAQ: SNDL)
It’s tough to make it through a long list of speculative penny stocks without mentioning at least one marijuana stock. Sundial Growers seems to have fallen into multiple categories. Not only is it one of the marijuana penny stocks to watch, but it’s also one of the few accessible on platforms like Robinhood and Webull since it’s listed on a major US exchange. Shares of the cheap cannabis name gained attention over the last year thanks to the surge of interest in meme stocks. Sundial was part of the limited trading access during the height of the meme stock craze.
I won’t go into a history lesson on SNDL stock, but the main thing to understand is that it is a popular name among retail traders and has shown sporadic trading activity in recent sessions. Cannabis stocks have gotten a bad rap over the last year, thanks to a lack of legislative progress. Regardless, it hasn’t stopped investors from throwing their money into the ring. Based on the latest options activity, some may have even taken bigger bets that they’re leading onto.
Right now, the cannabis company’s options chain is very active. There are hundreds of thousands of contracts of open interest flooded throughout multiple expiration dates. Right now, however, the contracts in question are Sundial’s April 14th $1 strike Calls. There are over 149,000 open interest contracts and more than 6,000 contracts traded today.
4. Takung Art (NASDAQ: TKAT)
If NFT stocks are something you’re interested in, then Takung might be one of the names on your list right now. It was one of the names that initially came up as an NFT penny stock to watch. Its involvement in the art industry made it a speculative bet at the time.
Other than putting new management in place, the art and collectibles company hasn’t released much news this year. No matter that case, traders remain focused on TKAT stock as a speculative bet to play the non-fungible token trend. NFTs are back in the news cycle thanks to a surge in cryptocurrencies, and traders are already placing their bets. To gauge this, look at the April 14th expiration Call contracts. In this case, the $5 strikes show fewer than 1,000 contracts of open interest. Volume, however, is much high at more than 3,600 contracts.
More Penny Stocks With Unusual Options Volume
As discussed, speculation can play a part in trading. Options activity is beginning to gain interest from retail traders looking for “hidden” sentiment in the stock market today. Here are a few more penny stocks with unusual options activity that may be of interest right now:
5. Vroom Inc. (NASDAQ: VRM)
The used car e-commerce platform provider has come under pressure in recent weeks. But that doesn’t seem to have impacted traders taking a bullish stance on the stock. The April 14 and May 20 expiration $5 strike Call options are in focus. Respectively, their open interests sit at 62,993 and 15,142, with volume above 15,000 and 10,000 contracts so far today.
6. iQIYI Inc. (NASDAQ: IQ)
Chinese online entertainment technology company iQIYI has recovered from its pullback this year. However, sentiment appears mixed based on the options chain. While there is much more significant volume compared to open interest in the $5 and $6 strike Calls for April 1, the $4 strike puts show much higher volume overall. Whether this translates into more bearish activity in the IQ market is to be seen but may be worth noting, all the same.
7. W&T Offshore Inc. (NYSE: WTI)
Another energy penny stock to watch right now is W&T Offshore Inc. If you look at the options flow, you’ll see why. The $5 strike options expiring April 14 have less than 500 open contracts. Meanwhile, there were more than 14,800 contracts traded as of this article.
8. Limelight Networks (NASDAQ: LLNW)
Earlier this month Limelight agreed to acquire Yahoo’s Edgecast Inc., which provides edge security and content services, in a deal valuing Edgecast at roughly $300 million. Even though LLNW stock has been on a roll for months as we’ve discussed, this news has sent a strong message to the market with moves to higher highs this week. Looking into the options flow, we can also see interesting activity in the May 20 $4 (in-the-money) Call options. There were about 2,000 open interest contracts with more than 4,100 traded according to today’s volume.
Options Activity & Penny Stock Speculation
The rewards are clear, but the risks can be immense. Since prices fluctuate, implied volatility changes, and time decay plays a role, the option’s value can change rapidly. Also, keep in mind that some traders will use options as a hedge to a long or short position. If they’re wrong, they can leverage their options positions to mitigate risk. All things considered, understanding that there is unusual activity and that it could be used to gauge speculation is one piece of research you can use as part of your broader diligence strategy.