When you think about penny stocks, rarely do options come to mind. That’s at least according to some traders in the stock market today. One of the reasons they’re buying penny stocks in the first place is to leverage small sums of money in exchange for more significant upside potential. Options are a cheaper way that investors can theoretically control more shares of higher-priced stocks without having the capital requirements to do so.
Believe it or not, many penny stocks also have options. Used as a speculative asset, some traders will look at options statistics to gauge bullish or bearish sentiment in specific stocks. Today we look at a few penny stocks with unusually high levels of Call buying activity. While this is not a guarantee that the underlying stocks will go up, it may be something to account for as you research the best penny stocks to buy based on retail sentiment.
Best Penny Stocks To Buy?
- Camber Energy Inc. (NYSE: CEI)
- FuboTV Inc. (NYSE: FUBO)
- Tilray Brands Inc. (NASDAQ: TLRY)
- Mullen Automotive Inc. (NASDAQ: MULN)
- Paysafe Ltd. (NYSE: PSFE)
Penny Stocks, Options Trading, Best Stocks To Buy
It doesn’t necessarily matter the price of the stocks you’re looking to buy. It’s more about the strategy you use to formulate your trade thesis. Regarding options volume, you can see things like Open Interest (O/I), volume, and if the volume is for specific strike prices with Calls or Puts. Generally speaking, an immediate assumption is that higher Call volume means traders are bullish, and Put volume means traders are bearish. But just like stocks, you can also “short” or “sell to open” your trade. Different options trading strategies allow you to take advantage of specific trends.
Whether it’s collecting a premium when stocks go down or capitalizing on sideways trading trends, options offer various ways to make money in the stock market. For this reason, it’s essential to understand that the face value of high Call or Put volume doesn’t necessarily mean a bullish or bearish move will come next. However, this data can come in handy from a more general stance and assuming you’re going to use more than options volume as your gauge to trade penny stocks. Today, we look at a handful of penny stocks with unusually high Call volume. Are they a buy?
1. Camber Energy Inc. (NYSE: CEI)
Energy stocks are heating up again. Even with the stock market down this week, you can count more than a few energy penny stocks on the rise. Camber Energy is one of these cheap stocks to watch and has become somewhat of a fan favorite among retail traders.
What does Camber Energy do? The company provides energy and power solutions to North American energy clients. The company has interests in US oil and natural gas assets and has remained a focus for those looking for cheap energy stocks to trade.
This week, shares of CEI stock have made a substantial rebound with the rest of the sector. On Friday, the energy penny stock jumped back above the $0.70 mark for the first time since Tuesday. What does the options chain say about CEI stock right now? If you look at next week’s May 20 Call options, you’ll see a significant amount of open interest and volume. The highest levels sit at the $1 Calls right now.
2. FuboTV Inc. (NYSE: FUBO)
Traders have had a love/hate relationship with FuboTV over the last few months. It has been a non-stop barrage of selling as Fubo has battled bearish sentiment in the stock market. We even discussed its potential of becoming a penny stock last month. As fate would have it, FUBO stock dipped into the sub-$5 territory shortly after.
Despite this as the case and in light of some negative sentiment in streaming entertainment stocks, FUBO shares have managed to rebound over the last two sessions. Even after a bearish outlook from the company, traders seem to have taken a more bullish tone on the stock. The options chain shows some short-term optimism according to the amount of Call volume today.
Specifically, the May 20th (next week) $3.50 Calls have gained the most attention. Heading into the session, there was less than 2,000 O/I. As of this article, more than 37,000 contracts have already been traded. As a close second, FUBO stock’s $4 Calls have also seen a significant jump in volume compared to O/I.
3. Tilray Brands Inc. (NASDAQ: TLRY)
Like streaming entertainment stocks, marijuana stocks have also gotten a bad reaction in the stock market. Failures to put new legislation in place in the US and a string of broken promises have bruised the reputation of the cannabis industry. Despite this as the case, investors have grasped at hope for the long-term prospects of this cash crop.
Tilray Brands has become somewhat of a high point for meme stock traders. Shares of TLRY stock were wrapped into the mix of stocks that Reddit traders favored during the AMC/GME pandemic rally. This week, TLRY has bounced back from 52-week lows as traders hunt for “oversold” stocks. In a Barron’s report earlier this month, Tilray was highlighted among the names that State of New Jersey Common Pension Fund D purchased. The Fund also grabbed shares of companies like Uber and Advanced Micro Devices.
The company’s recent earnings results seem to have also brought some optimism to the market. It recorded 23% revenue growth for its fiscal Q3. Tilray also noted that international cannabis revenue jumped 4,000% year-over-year. While this remains a penny stock, the company’s revenues have remained a bullish driver. Tilray reported a gross profit of $40 million on $152 million in revenue.
Once again, the May 20th options chain is in focus. However, it could suggest some mixed sentiment. For starters, there is much more Call volume on Friday than Put volume. In particular, the May 20th $4.50, $5, and $5.50 Call strikes are in question. As far as Puts are concerned, there is a glaring O/I figure at the $4 strike Put.
4. Mullen Automotive Inc. (NASDAQ: MULN)
LIke Camber, Mullen Automotive has come into favor with retail and Reddit traders this year. The EV automaker gained attention during the first quarter after management expressed strong optimism about its growth prospects. However, MULN stock slid back to earth after researchers at Hindenburg Research discussed how Mullen wouldn’t be able to deliver on multiple “grand promises” made. Known for their short take on stocks, in general, the market has grappled between speculation, downbeat sentiment, and an overall bearish trend in major indexes.
However, things seem to have made a rebound this week after Mullen’s latest update. It reported a preliminary summary of second-quarter financial results. Quarter over quarter, cash and equivalents great to over $65 million. Meanwhile, the company saw a decrease of more than 10% in notes payable.
Most notably, Mullen signed a proposal with Thurner Design for the vehicle development of the Mullen FIVE RS, a high-performance EV sport crossover vehicle featuring close to 1,100 HP, 0-60 mph in just 1.95 seconds, and 200 mph top speed. According to the company, Thurner Design’s team is responsible for shaping and directing designs and brands like Rolls- Royce Motorcars, Bentley Motors, Bugatti, Porsche, Lamborghini, Aston Martin, and Mullen Automotive.
There was substantial Call option volume at the $1 strike levels expiring May 20th, May 27th, and June 3rd. O/I was significantly lower coming into the day as options volume surpassed those figures.
5. Paysafe Ltd. (NYSE: PSFE)
The payments company Paysafe has turned some heads in the stock market today. Following news of a global payment partnership with Playtech, the company’s payment solutions will now have additional offerings in iGaming operations.
The company had encountered some intense selling pressure following recent earnings. But that seems to have subsided on Friday. PSFE stock hit early highs of $2.36 during the morning session, up from premarket lows on Thursday of $1.81. It may also be worth noting the options volume today. In particular, the market seems torn at the $2 strike. Both Call and Put volumes are around the same level right now. Open interest is also in relative parity for the May 20th expiration.
Final Thoughts On Penny Stocks
Penny stocks can be worth the risk if you know what you’re doing. Understanding how to navigate volatile trading environments is critical. But, also using data to your advantage can become an asset too. Options volume like insider trading reports can be a way to gauge sentiment. It isn’t the only way to do so, and there aren’t any guarantees in the market altogether. However, if you are looking for penny stocks with unusual options activity, these are just a few of the names that turned heads in the stock market today.