Is it easy to find the best or hot penny stocks to buy in the stock market today? If you know what you’re doing, the answer is yes, but how can you do it? You could look for trends on social media on places like Twitter or Reddit. You might also try to sift through endless financial statements to find the “most sound” penny stocks with solid earnings growth or high dividends. But it might be even easier than that.
Something that traders have begun focusing on is options volume. Some are looking to find specific activity they’ll assume to be “whale activity,” with more prominent investors potentially taking bigger “bets” on a stock through options. Today we look at 5 penny stocks with unusual options activity to buy for under $5 in April.
Hot Penny Stocks To Watch
- Paysafe Ltd. (NYSE: PSFE)
- Takung Art Co Ltd. (NYSE: TKAT)
- Up Fintech Holdings (NASDAQ: TIGR)
- Nordic American Tankers (NYSE: NAT)
- Aterian Inc. (NASDAQ: ATER)
Best Penny Stocks To Watch, April 2022
So what exactly is “whale watching” anyway? It has nothing to do with boats, water, or sea-bound mammals in this context. Whale watching in the stock market involves searching for big money bets and unusually large trades. Some traders look for block trades; others search for what we’ll discuss today, unusual options activity. For example, if an option typically trades a few contracts per day but suddenly, we see thousands of trade, that would be considered “unusual” activity.
Similarly, if a specific options contract has very little open interest but suddenly sees a higher multiple traded for volume, that could be considered unusual activity. Remember that not all volume is buying volume, so the data can be skewed. However, it is worth noting and another metric to include in your diligence process. With today’s list of penny stocks, does this unusual options activity suggest bullish or bearish sentiment in the stock market today?
1. Paysafe Ltd. (NYSE: PSFE)
Shares of Paysafe jumped on Friday thanks to several big headlines this week. The payment platform company expanded a partnership with betPARX to provide payments for the betPARX mobile apps in Pennsylvania and New Jersey. Paysafe also appointed a new CEO who will join the company in May. These two announcements seem to have brought some much-needed excitement back to the company’s stock this month.
It also seems to have brought some momentum into the PSFE options market. The April 14th Call contracts are the ones in question today. As of this article, nearly double the amount of open interest has traded in the $3.50 strike Call options. In addition, the $4 and $5 strike Calls have the largest open interest of all strikes in the chain. PSFE stock could be on the watch list for traders this month, given the upcoming CEO event.
2. Takung Art Co Ltd. (NYSE: TKAT)
Thanks to growing interest in digital assets, non-fungible tokens (NFTs) are increasing in popularity. Traders remain focused on TKAT stock as a speculative bet to play the non-fungible token trend. It was one of the names that initially came up as an NFT penny stock to watch when the trend first emerged. Its involvement in the art industry has helped continue this trend.
Other than putting new management in place, the art and collectibles company hasn’t released much news this year. In any case, Takung remains a focus, especially when cryptocurrencies and NFTs build momentum. With the price of Bitcoin up today, TKAT has gained some new interest from options traders. What are they looking at? In particular, the April 14th $5 Calls are in focus. As of this article, more than 2,000 contracts have traded, and current open interest sits at 4,865.
3. Up Fintech Holdings (NASDAQ: TIGR)
Sticking with the digital asset trend, Up Fintech, as its name suggests, specializes in brokerage products for global investors. The recent filing of its Q4 and full-year 2021 financials has helped give TIGR stock a boost in the market. Up Fintech reported revenue growth for the fourth quarter and full-year of 31.7% and 91% respectively.
“We participated in 22 IPOs in Hong Kong and the U.S. during the fourth quarter. We also added 51 new ESOP clients this quarter and serve 313 ESOP clients in total as of December 31, 2021…Going forward, we will continue to focus on executing on our international expansion strategy as well as enhancing the functionality of our innovative fintech platform,” explained Wu Tianhua, CEO and Director of UP Fintech.
As far as “whale watching” goes, the expiration dates of April 20th and July 15th are in focus. In particular, the May $7.50 and July $10 & $12.50 Calls are in focus. They’ve all seen significant amounts of volume paired with higher open interest.
4. Nordic American Tankers (NYSE: NAT)
Reopening efforts and supply chain issues continue boosting attention on logistics and energy stocks. This year, Nordic American Tankers has been on the move as the company reaches new milestones. Most recently, Nordic announced that there is “solid momentum” in the market as it is currently securing spot contracts for a month or longer. Rates are above $50,000 per day, and according to Nordic, operating costs are roughly $8,000 per day per ship.
The options activity in the stock market today for NAT is in the May 20 Call contracts. Specifically, the $3 Calls have more than 1,800 contracts traded with over 4,400 open interest. It may also be worth noting that the July 15th $2 Calls have more than 17,800 contracts of open interest.
5. Aterian Inc. (NASDAQ: ATER)
Aterian is popular among the Reddit crowd this month. That’s thanks, in part, to a trend in “short squeeze stocks” that has taken the focus of retail traders. As of right now, ATER stock shows a short float percentage of more than 30%, according to Fintel.IO data. The eCommerce tech company recently appointed Cynthia Williams to its Board. The company’s cloud-based platform AIMEE (Artificial Intelligence Marketplace Ecommerce Engine), uses machine learning and natural language processing to allow users to better manage products at scale across multiple online marketplaces. These marketplaces include Amazon, Shopify, and Walmart.
Are “whales” placing bets on ATER stock? If you look at the April 14th expiration, you’ll find where the action’s at right now. In particular, the $5 Calls have shown the highest open interest and the most significant 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 to hedge a long or short position. They can leverage their options positions to mitigate risk if they’re wrong. Understanding that there is unusual activity and that it could gauge speculation is one piece of research you can use as part of your broader diligence strategy.
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