Retail investors are on the prowl for the best penny stocks to invest in. We’ve touched on several unique trends currently influencing the stock market, including sentiment-driven sympathy trades. The concept behind these trades is that certain stocks see a surge in buying due to another company’s achievements, milestones, or heightened attention. Just look at AMC Entertainment (NYSE: AMC) during the inception of the “Ape Movement.”
Investors rallied behind the beleaguered company that had been heavily shorted by Wall Street’s big players, igniting a ripple effect of interest in other similarly positioned companies. Many of these stocks saw their prices skyrocket for weeks, while others experienced a fleeting spike due to various factors. This “ripple effect” or its absence is a key reason why trading penny stocks based on sympathy catalysts can either yield substantial profits or leave investors holding the bag.
Finding Penny Stocks to Buy
This is just one method traders use to discover penny stocks to invest in. Utilizing data like social sentiment levels can add value to your research process. Traders are also compiling their watchlist of penny stocks by examining alternative data such as insider reporting and, as we’ll explore today, unusual activity in the options market.
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Stocks With Unusual Options Action
One of the main advantages of monitoring unusual options volume is that it can unveil the moves of the “smart money” or institutional investors in the market. These large investors often have access to superior information and research resources compared to the average retail investor, and their actions can offer valuable insights into potential market trends. By tracking unusual options volume, investors can potentially “follow the smart money” and seize emerging opportunities.
Another benefit of observing unusual options volume is that it can assist investors in identifying sectors or industries experiencing increased interest. This can be especially valuable during periods of market rotation or when specific sectors outperform others.
By concentrating on securities with unusual options activity within these sectors, investors can potentially pinpoint the market’s next frontrunners. Here are a few penny stocks with above-average options volume.
Penny Stocks to Watch
- Cano Health Inc. (NYSE: CANO)
- Globalstar Inc. (NYSEAMERICAN: GSAT)
- Rite Aid Corp. (NYSE: RAD)
Cano Health Inc. (CANO)
Shares of Cano Health have seen some of their highest trading volume days over the last week. CANO stock price has also climbed to some of its highest levels in months. Friday, the primary care provider and health company ticked to highs of $1.74 without any apparent news catalysts accompanying the rise.
Late last month, the company announced it would deliver second-quarter earnings results on August 9th. Whether that’s a source of speculation is to be seen. However, that seems to have come secondary to the overall trend in the stock market today.
The company posted an earnings and sales beat for the first quarter of 2023. Cano also raised its full year 2023 guidance for membership and total revenue. It also reaffirmed its full year guidance for total MCR and adjusted EBITDA. Membership is expected to come in a range of 390k to 400k. Total revenue is expected to come in between $3.25 billion and $3.35 billion.
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As for the unusual options action in the stock market today, traders are looking at the August 18th $2 Calls. More than 26,000 contracts were traded as of this article. That is compared to only 2,345 in Open Interest.
Globalstar Inc. (GSAT)
The last week has been strong for Globalstar. The company’s shares climbed from around $1 to highs of nearly $1.30. This move also coincided with better earnings from Globalstar. It managed to beat sales estimates and guidance was above expectations.
Globalstar stated, “We update our previously issued financial guidance for full year 2023 with anticipated results included below. Note that this outlook excludes revenue from terrestrial spectrum opportunities. Total revenue between $200 million and $230 million , which would represent an increase of approximately 35% to 55% over 2022 total revenue. Adjusted EBITDA margin of approximately 55%, compared to 39% in 2022.”
As for the options action, there was a noticeable jump in the January 19, 2024 $1.50 Calls. As of this article, more than 13,400 contracts were traded. This is compared to over 20,000 Open Interest contracts. Meanwhile, the rest of the Call side of the options chain remained heavily weighted at the $2 and $5 strikes with regard to Open Interest.
Rite Aid Corp. (RAD)
Whether it’s sympathy sentiment from other pharmacy stocks or optimism stemming from a perceived opportunity with beaten-down household name stocks following the explosion of TUP stock is up for debate regarding Rite Aid.
The company’s shares have been sold to some of the lowest levels in a year. But a recent update in action on Wednesday sparked a rally in RAD stock. What may most likely have something to do with earnings, industry headliner CVS Health (NYSE: CVS) reported better than expected earnings and devices its GAAP EPS guidance higher for the year.
This has brought some added optimism for related sector names. RAD stock is one of the lowest-priced, notable names to watch for some. Shares surged to highs of over $2.70 during the morning session. Due to the heavier selling pressure, RAD is also on the list of short-squeeze stocks to watch. According to TD Ameritrade, the RAD stock short float percentage sits around 22.79%.
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What about the options action? Rite Aid stock’s August 18th $3 Calls are in focus. As of this article, more than 7,700 were traded compared to just over 10,000 Open Interest contracts. More notable may have been the $4 strike Calls where volume outpaced Open Interest by more than double.
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