Penny Stocks With Unusual Options Activity
Have you ever wondered how to put together a penny stocks watch list? While there isn’t one single failproof method, there are certain things to remember when doing so. First, what are you looking to do? Are you looking to buy penny stocks and catch short-term momentum? On the other hand, are you trying to find penny stocks to invest in or play a speculative theory over a more extended period? Understanding your goals will help define your strategy.
In keeping with this theme of speculation, there are certain things that retail traders have looked into that have ultimately acted as catalysts. We’ve discussed a few more sweeping trends, including stocks with insider activity, irregular trading volume, short-squeeze penny stocks, and low-float penny stocks under $1.
But one of the most popular topics we’ve discussed over the last few months is stocks with unusual options action. Penny stocks aren’t typically known for options, but when you find them, not only can things become volatile for their derivative cohorts, speculation can begin to buzz. There aren’t any guarantees, of course. But in general, when traders have seen unusual call buying or put buying, that has acted as a signal for sentiment.
We’ll discuss this in more detail later in the article if you’re unfamiliar with options trading, sentiment, and speculation. For now, let’s look at a handful of penny stocks with unusual options activity today. One of the focus points is expiration dates that are not short-term but longer-term options action.
Penny Stocks To Watch
Bed Bath & Beyond (BBBY)
Shares of Bed Bath & Beyond are no strangers to speculation-fueled trading. The big-box home goods retailer has faced plenty of headwinds thanks to a dwindling economic outlook thanks to higher inflation. Nevertheless, its epic rally during the summer of 2022 has been a reason that traders keep BBBY stock on the radar.
As a refresh, that period was when some expected big moves based on significant trading action in both the stock and options market. There were also questions about the validity of Bed Bath & Beyond’s financial records in light of the unusual circumstances surrounding its then-CFO’s death.
As we’ve come to find, the speculation was simply that; speculation. The result was an aggressive sell-off in the market with a slow bleed that took shares to new lows of $2.25 this week.
The company reports its next round of earnings results next week. Leading up to the date, some are placing bets on the outcome as BBBY stock made a rebound on Wednesday. Heading into the new year, there may be something else to pay attention to: the BBBY options chain. In this case, there was unusually higher volume in the January 19, 2024, $45 Call contracts. In addition, there are over 20,000 contracts of open interest to not.
Canopy Growth (CGC)
Marijuana stocks haven’t gone as high as some would have hoped at this point. Stalled legislative efforts on SAFE banking and other hopeful changes to scheduling have hurt the cannabis industry. But that hasn’t stopped some from speculating on a 2023 turnaround.
Canopy Growth is one of the pot stocks trying to right the trend. It recently shed some of its retail assets to reach profitability more quickly. Canopy divested its Tweed and Tokyo Smoke assets in Canada via transactions with OEG Retail Cannabis and 420 Investments Ltd.
“The divestiture of our Canadian retail business marks an important step forward on our path to profitability and furthers Canopy Growth’s focus on generating revenue growth in the Canadian market,” stated David Klein, CEO of Canopy Growth. “These retail locations will continue operating under the experienced leadership of OERGC and FOUR20 under their respective retail brands to serve Canadian consumers with high-quality in-store experiences.”
In addition, some traders are focused on the July options for CGC stock. Specifically, the July 21, 2023, $3 Calls saw an uptick in volume with over 2,700 contracts compared to fewer than 500 Open Interest on Wednesday. The seemingly bullish bet came as CGC stock bounced back above $2.45 for the first time since before the Christmas holiday.
Shares of the office-sharing company continued higher on Wednesday as WE stock made new 2-week highs. This week the company issued $250 million in two-year bonds to SoftBank Vision Fund II-2 and said it had liquidity of about $1.35 billion at the end of last year. This was in line with expectations. Concerns have been raised regarding the once extremely liquid company. Fears of default and other finance-related headwinds have contributed to the stock’s decline.
Last month WeWork announced a new SoftBank appointment to its Board. Vikas Parekh, the managing partner at SoftBank Investment Advisers, is hoping to bring a new perspective to “enhance” the efforts to “lead the industry with a suite of connected, flexible space solutions.”
As far as the options market is concerned, it seems to be all about the March expiration. In this case, the March 17, 2023, $2 Calls have seen both the highest Open Interest and trading volume. More than 59,000 contracts are open, and just under 5,500 contracts had traded at the time of this article.
Luxury fashion company Farfetch has been out of fashion in the stock market over the last year. FTCH stock fell more than 88% in the previous 12 months due to multiple headwinds. Mixed earnings results and shakey customer growth have contributed to growing market concerns.
It may be “New Year, New FTCH” for now. Shares of the penny stock managed to climb from 52-week lows last month of $3.64 to highs this week of just under $5. The outlook for consumer discretionary stocks has been a bit foggy due to current economic conditions. But that doesn’t seem to have stopped seemingly bullish action in the options market for FTCH stock.
The February 17, 2023, $5 call saw irregular activity in this case. Open Interest for the strike sat at 845 contracts. Meanwhile, more than 1,200 traded at the time of this article on Wednesday.
Up Fintech Holding Limited (TIGR)
Asia-based companies have faced plenty of volatility in the market over the last year. Most recently, a more bullish tone has helped in the recovery of many of the beaten-down names. Up Fintech is one of the companies seeing a turnaround lately.
One of the main reasons for the massive price drop was Chinese regulators. Up Fintech was named as one of the companies that “conducted illegal securities business” and was asked to take corrective measures.
Fast-forward to the new year, and TIGR stock has slowly started to reclaim what it lost during the final few days of 2022. Wednesday saw shares climb to highs of $3.59 during early morning trading. In addition, the options market for TIGR stock also perked up. In this case, some of the highest volumes were in the April 21, 2023, $5 Calls. More than 2,500 contracts had been traded at the time of this article.
Penny Stocks & Unusual Options Activity
If you’re new to options, in general, and this sounds foreign to you, check out our primer on options basics: Trading Options 101: A Beginner’s Guide. Traders have used unusual options activity to identify potentially bullish or bearish moves in the market that typically happen around specific company events.
These “events” can be confirmed or speculated on. For instance, a few months ago, we found unusual options activity in a particular biotechnology stock in an options chain that was roughly one month in the future. The particular expiration date was the closest date related to an upcoming clinical study data readout.
The company ultimately reported mixed data, and shares saw a pullback. But leading up to the date, the biotech penny stock rallied. This isn’t always the case when it comes to unusual options data. Most of the time, speculation is a more significant factor at play. What traders think might happen tends to drive the action, which presents a very high-risk environment. Nevertheless, this alternative data might be helpful for traders looking for such a scenario.