Want to find the best penny stocks to buy now? Start looking for catalysts. The average trader or investor might start by looking for an immediate headline released in the last 72 hours. Others might jump straight to corporate filings or try to find penny stocks trending on Reddit. Short squeeze stocks have also been popular but that data can be a bit muddy depending on the source of information.
You could also try to find what analysts think about certain stocks. The trouble there is ratings can be subjective to the current makeup of a company. That means if the target was set based on events from last year, but the company is doing something completely different now, the rating might not hold as much weight.
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While every catalyst or data point may not be entirely accurate on its own, combining information can help when compiling a more robust overview of the companies on your list of penny stocks to watch. This article goes beyond some of the catalysts mentioned above. We look at a handful of penny stocks with unusual options volume in the stock market today.
How To Use Unusual Options Activity
If you’re new to this type of data analysis, it’s important to understand what you’re looking at. In particular, we’re looking at Volume and Open Interest at specific strike prices at specific expiration dates. Open interest is the amount of contracts still held going into a session. Volume is the actual daily flow of trading.
Like stocks, you can “buy to open” a position, and you can also “sell to open” a position. The first method suggests the trader favors the direction of the options: Buy to open Puts, and there’s a good chance the assumption is a move to the downside. The opposite can be the same for buying Calls. However, this isn’t always the case.
Similarly, “selling to open” is a way for traders to play the opposite move. Essentially, the play is “shorting” the option and/or looking to capitalize on premium. The point of discussing this is to emphasize that all of these trading styles factor into the volume and open interest.
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You’ve also got another reason for traders to buy options: hedge a more significant share position. For example, if earnings are coming up and a trader has a large short on a stock, they might buy Call options to hedge their position in case earnings are good enough to boost share prices.
The bottom line is that just because there’s high volume for a particular strike in a specific expiration doesn’t mean it’s definitely a bullish or bearish sign. Take this into account when looking at options volume statistics. For more info on trading options, you can also check out, Trading Options 101: A Beginner’s Guide.
Best Penny Stocks To Buy [or avoid]
Now that we’ve got some of the basics, let’s dive into this list of penny stocks. We’ll look at the unusual activity, and then you can decide if it’s worth a closer look or not heading into the rest of the month.
- SmileDirectClub Inc. (NASDAQ: SDC)
- Sonder Holdings Inc. (NASDAQ: SOND)
- Astra Space Inc. (NASDAQ: ASTR)
SmileDirectClub Inc. (NASDAQ: SDC)
Shares of SmileDirectClub have been on our lists of penny stocks to watch since late June. This came after the teeth alignment company dipped to 52-week lows of $0.98. Fast-forward to this week, and shares of SDC stock are up over 60%, and some unusual options activity has brought a bit more interest.
In this case, the August 19th (next week) $2 Calls are gaining steam with thousands in volume compared to hundreds in Open Interest. There is also some action building in the September 16th $2 Calls.
The company just reported earnings with mixed reactions from the market. Needless to say, management remains optimistic based on its cost control activity during the first quarter to help curb expenses. SmileDirect also put a focus on leveraging its technology to roll out a mobile scanning app as part of its SmileMaker Platform.
CEO David Katzman explained, “In addition to our SmileMaker Platform, we will continue to focus on executing on our key strategic growth initiatives, including expanding our customer reach through our Partner Network, investing in proprietary technologies and product innovations, developing and launching our SDC+ solution and pursuing profitable SmileShop expansion.”
This mix of speculative bullishness and options activity has put SDC stock on the radar of traders during the second half of this week.
Sonder Holdings Inc. (NASDAQ: SOND)
Another one of the penny stocks with unusual options activity today is Sonder Holdings. The company specializes in hospitality technology to design unique experiences for guest accommodations. This week Sonder reported its latest round of earnings and beat sales estimates by a wider margin. As reopening continues (believe it or not), hospitality companies have come back into focus.
What do options traders think? Right now, we see that the September 16th $2.50 Call options have gotten the most amount of volume in the stock market today. This comes about a week after Sonder began consolidating its operations teams and appointed two leadership level members to the Chief Operating Officer and Cheif Accounting Officer positions.
“We have a world-class leadership team, which we’re strengthening further by elevating existing talent and hiring from the industry’s best. Deeksha Hebbar steps up as COO following almost five successful years at Sonder, while Chris Berry brings deep travel industry experience to the CAO role,” commented Francis Davidson, Co-Founder and Chief Executive Officer of Sonder, in an August 2nd update.
Astra Space Inc. (NASDAQ: ASTR)
Some of the higher-risk industries that have seen higher volatility in the stock market this year include things like EV and space stocks. Astra Space is one of the names that has quietly climbed over the last few weeks since hitting 52-week lows of $1.19 in June.
The company specializes in launch services for space missions, including satellites and rockets. A recent insider purchase by Director Michael Leham has helped boost sentiment in the stock market today. Leham picked up 100,000 shares of ASTR stock at an average price of $a1.3426, more than doubling his position.
What do options traders think about the space penny stock? The August 19th and September 16th $2.50 Calls have seen the highest level of volume in the stock market today. Whether or not this is a bullish bet on the future of ASTR stock is to be seen but it might be worth noting if it’s on your list of penny stocks to watch.