Searching For The Best Penny Stocks To Buy Now? Take Some Hints From Unusual Options Activity
If you’re looking for the best penny stocks to buy right now, you’ve got your work cut out for you. The heightened volatility in the stock market today is some of the wildest we’ve seen all year.
Though recent economic data supports a more dovish Fed moving forward, headline risk is still a significant factor. But sometimes, you can find clues in advance by looking at options volume and open interest. Today we look at a handful of penny stocks to watch with this factor at play.
We focus on previous, current, and upcoming events that could support such unusual activity. Is it always “Calls = bull run incoming” or “Puts = big pullback on the way”? No, but some traders use irregular activity as one of the many other data points in their research process.
Take, for instance, this options chain posted by True Trading Group’s Wolf Of Weed St on Twitter:
In this example, the focus is on massive options volume in the Carnival Cruise (NYSE: CCL) $11 Put options expiring in March 2023. This was unusually high, considering the market was on the way up and CCL stock was surging. In addition, the options volume was more than 10x the open interest. In less than one week, “coincidentally,”
Carnival announced $1 billion financing at a discount to the market that, sent shares plummeting. The ability to identify unique activity in options chains could have acted as a warning sign to those looking to buy the stock and a potential catalyst for anyone looking to short it. It isn’t always the case, but again, it is one piece of the many pieces that go into a data-driven research strategy.
Penny Stocks To Watch With Unusual Options Action
Canopy Growth Corporation (CGC)
There’s no shortage of hype beyond penny stocks; when you talk about specific industries, that excitement can compound. Marijuana stocks are one example of this, and the latest election cycle has placed them on “high” alert.
Canopy Growth was previously a bellwether for the industry as it garnered one of the most significant investments (at the time) from alcohol juggernaut Constellation Brands (NYSE: STZ). Fast-forward, and CGC is a fraction of the share price when the deal was signed in a very different cannabis climate.
What has some investors paying closer attention to marijuana penny stocks this month is pending legislation. This week a joint memo published by Democrats and Republicans in the House outlined details on pending reform. This memo was published ahead of a subcommittee meeting on the topic of cannabis, covering decriminalization, regulation protocols, and specific justice reforms.
The motions come just after Canopy Growth reported more robust Q2 FY 2023 earnings results. Net revenue grew 7% sequentially. “Our second quarter marks a key inflection-point for Canopy, demonstrating momentum across our key businesses and accelerating our entry into the U.S. cannabis market through the creation of Canopy USA. Canopy is ideally positioned to capitalize on this once-in-a-generation opportunity and accelerate our path to North American cannabis market leadership.”
As far as options are concerned, a few things are at play. In particular, a Straddle at the $10 Strike expiring December 16, 2022. But what may be more interesting is a higher volume trade in the April 21, 2023, $7 strike Calls. Considering this is far into the future, it could be something to keep in mind if CGC is on your list of penny stocks.
Agenus Inc. (AGEN)
Biotechnology penny stocks have been heating up even as broader markets cool. Agenus, Inc. is no stranger to big moves and the last week of trading is an example of that. Since November 9th, AGEN stock has climbed from lows of $2.01 to over $3.35. This jump was helped by an earnings beat in the third quarter and news of additional data from the Agenus Phase 1 trial of botensilimab in multiple cancer types.
At the Society for Immunotherapy of Cancer, Agenus demonstrated durable response data of the treatment candidate in nine different cancer types. Steven O’Day, M.D., Chief Medical Officer of Agenus, explained, “The superior efficacy we observed in our MSS-CRC presentation at GI ESMO earlier this year has remained consistent across a larger dataset. Further, we are seeing a strong signal with higher response rates than has been reported with other immunotherapies in multiple tumor types, including anti-PD-(L)1 relapsed/refractory NSCLC. These data provide compelling support for our ongoing Phase 2 botensilimab development program and highlight the broad therapeutic potential of botensilimab across solid tumors.”
The company also participates in the upcoming Evercore ISI HealthCONx Conference on November 30th. Given this backdrop, it may not seem odd that unusual options activity is at play. In particular, there was heavy volume for January 20, 2023, $3.5 and $5 Calls. There was also heavier volume than pen interest in the January 19, 2024, $10 Calls.
Globalstar Inc. (GSAT)
Communications and satellite technology provider Globalstar has been a standout among penny stocks this year. Since hitting lows of $0.90 during the first quarter, GSAT stock has climbed as high as $2.98. Additionally, anyone looking at technicals will notice that its 50-day moving average has become a significant level of support and resistance over the last 11 months.
What’s going on with Globalstar now? Globalstar has gotten some new interest thanks to Apple (NASDAQ: AAPL), let me explain. The iPhone’s new SOS satellite connectivity feature runs on Qualcomm chips. Globalstar came into the picture because the Qualcomm chip offers 5G connectivity and is capable of using the frequency band used by Globalstar satellites, n53. Apple has also earmarked $450 million for the iPhone 14’s satellite emergency SOS.
Other than speculation, GSAT earnings came out this month. It missed EPS estimates but beat sales expectations but a wider margin. The company hosts Globalstar Investor Day this week, which could bring its own set of potential catalysts. As of this article, options traders are focused on January 20, 2023, $2 strike Calls. More than 42,000 contracts traded compared to 38,563. Meanwhile, throughout that expiration’s chain, there is a significantly higher amount of open interest in Calls than puts.
How To Find Penny Stocks To Buy
In this article, we discussed a few penny stocks with some unusual options activity. While the final decision is up to you, data can give some insight into the market potential of certain penny stocks. But there’s no substitute for education. Learning how to trade is more valuable than simply finding the next stock pick from a random social media account.
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List Of Penny Stocks In This Article
- Canopy Growth Corporation (NASDAQ:CGC)
- Agenus Inc. (NASDAQ:AGEN)
- Globalstar Inc. (NYSEAMERICAN:GSAT)
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