Looking For Penny Stocks to Buy? Check Options Volume For Clues

If you’re looking for penny stocks to buy right now, you’ve got to have a strategy. Closing your eyes and throwing a dart won’t work (most of the time). But having a plan of action and knowing how to properly research can. Some traders take the approach to be more predictive than reactive. They hunt for clues that may not be so obvious to the untrained eye as something like a press release.

Company headlines are generally an “in-your-face” type of catalyst. Everyone sees them, and they aren’t challenging to find. But for things like insider trading activity, hedge fund trading activity, and what some call “whale trade,” that takes a bit more work to obtain. Of course, it isn’t completely inaccessible, and all the information is publicly available.

You need to know where to look and what to look for. Specific parameters are necessary, in my opinion. With the example of insider trading, you might see a CEO of some micro-cap stock buying company shares. But if it’s the purchase of a few hundred dollars worth of shares, does that carry any merit in the grand scheme? Probably not. So it can’t just be the “event” of insider trading that acts as a catalyst but the size and scope of the trades being made.

Penny Stocks With Unusual Options Activity

This article looks at penny stocks with options. This is more common than you might think, but some traders don’t believe cheap stocks have option chains due to the lower price. These derivatives have also been used to find unusual activity and then translate that into speculative decisions in the stock market.

High levels of Call buying or Put buying can be seen as signals for underlying bullish or bearish sentiment. Of course, this isn’t to say that the Call & Put volume isn’t attributed to selling instead of buying.

But a general approach to observing options volume is taking a standard approach and using that data as part of a much more detailed due diligence process. Here are a handful of penny stocks with irregular options trading activity in the stock market today.

Nu Holdings (NYSE: NU)

Some are calling Nu Warren Buffett’s play on Bitcoin and, now, penny stocks. The Oracle of Omaha has been previously known for his stance against these types of low-priced stocks. He has also gained attention (along with his cohort Charlie Munger) for being against digital currencies. Munger, more than Buffett, has taken a hard line against Bitcoin.

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Earlier this year, Munger made statements such as, “In my life, I try to avoid things that are stupid and evil and make me look bad in comparison to someone else, and bitcoin does all three.” He also said, “In the first place, it’s stupid because it’s very likely to go to zero, and it’s evil because it undermines the Federal Reserve System and national currency system, which we desperately need to maintain its integrity and government control and so on.”

Nevertheless, it hasn’t stopped the firm from investing in financial assets with exposure to cryptocurrency. Nu Holdings is one of these companies. Nu is a digital bank in Brazil, and its most recent quarterly results showed it’s also realizing significant customer growth. CEO David Velez, who also founded the company, explained in an August business update, “Our largest operation – Brazil – is now profitable, having registered a net profit of US$ 13 million in the first half of 2022, driven by customer growth to 65 million and ability to offer and cross-sell new products.”

NU Stock Options Activity

penny stocks to buy Nu Holdings NU stock options chain

Now traders are looking ahead toward the next round of results that come on November 14th. In anticipation of those results, it seems like the options market has begun waking up. Large ” bets ” are being placed in the November 18th $5.50 Call options right now. Today more than 46,000 contracts were traded, nearly equal to the 47,918 already accounted for in Open Interest.

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Transocean Limited (NYSE: RIG)

Energy penny stocks remain a hot topic of discussion this month. Thanks to rising energy prices globally, companies with exposure to oil, gas, LNG, and even renewables have gotten attention. Transocean has ownership or partial ownership in 38 offshore drilling units, including ultra-deepwater and harsh environment floaters. As a provider of contract drilling services for oil and gas wells, it has been more directly impacted by shifting commodities prices in the stock market this year.

One of the more recent catlystst helping propel RIG stock is the latest round of earnings. Transocean posted an earnings and sales beat for the third quarter. EPS came in at a loss per share of 4 cents compared to estimates of a loss per share of 18 cents. In addition, sales were reported at $691 million compared to estimates of $666.67 million. It was also able to narrow its adjusted loss for the quarter.

CEO Jeremy Thigpen explained, “The robust demand for our assets and services helped us secure an incremental $1.6 billion since our July 25 Fleet Status Report, contributing to our already industry-leading backlog. We remain encouraged by the sustained strength in the offshore drilling market globally and expect demand for the increasingly scarce high-capability drilling rigs Transocean owns and operates to remain strong for the foreseeable future, resulting in higher utilization and dayrates.”

RIG Stock Options Activity

penny stocks to buy Transocean RIG stock options chain

Regarding unusual options activity, the November 18th $3 Calls have seen the most volume. This is interesting because it is a deeper in-the-money call in the chain.

iQIYI Inc. (NASDAQ: IQ)

China-based company stocks have found some footing in the stock market during the second half of the week. The move comes after COVID news, and other headlines prompted a sell-off in China stocks earlier this month. iQIYI has managed to weather the storm over the last few weeks following its Hack Day event. The Chinese online entertainment service provider offered a platform for techies to use expertise from numerous technical fields and propose “practical implementation” of new ideas.

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CTO LIU Wenfeng explained, “From front-end algorithms to intelligent production, the entries presented clear new directions that the integration of cutting-edge technology and content production can take. The projects are well positioned to inspire new industry possibilities,”

IQ Stock Options Activity

penny stocks to buy iQIYI Inc. IQ stock options chain

News of looser COVID restrictions promoted a bullish tone today. IQ stock was one to have benefited. In addition to momentum in the stock market, the options market for IQ has also experienced an uptick in activity. Specifically, January 20, 2023, $3.50 Call options were the ones gaining the most attention. With over 3,000 contracts traded in such a long-term option, it raised some eyebrows.

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