best penny stocks to buy with options right now

If you’re looking for penny stocks to buy today, broad stock market news might not be at the top of your mind. However, whether focusing on small cap stocks or larger cap stocks, things like today’s PPI inflation data report are worth knowing about. This morning, before the stock market opened at 9:30 AM ET, Producer Price Index data revealed wholes inflation is still running hot.

PPI Report Summary

PPI Expectations (month-over-month): 0.3%
Actual PPI (month-over-month): 0.5% ABOVE EXPECTATIONS

PPI Expectations (year-over-year): 1.6%
Actual PPI (year-over-year): 2.2% ABOVE EXPECTATIONS

CORE PPI Expectations (month-over-month): 0.2%
Actual CORE PPI (month-over-month): 0.3% ABOVE EXPECTATIONS

CORE PPI Expectations (year-over-year): 2.3%
Actual CORE PPI Expectations (year-over-year): 2.7% ABOVE EXPECTATIONS

What does this mean for the future of things like the upcoming Fed meeting and rate hike decision? For starters, the latest Fed minutes will need to be accounted for before answering that question. Those come out today at 2 pm ET where the market will likely sift through all of the verbiage used to try and find anomalies. Furthermore, the CME FedWatch tool hasn’t changed much from this morning. The tool, which is used to speculate on chances of a rate hike, still shows a more than 80% likelihood of rates holding steady at the next meeting.

PPI Report Live: Producer Price Inflation Report Is Out, Here’s What It Shows

Does this data impact penny stocks? The short answer is yes and no depending on what you’re looking at. It can come down to specific sectors like energy, for instance. Oil prices slumping typically doesn’t bode well for oil and gas penny stocks. Nevertheless, even when the stock market is down, there are pockets of opportunity to capitalize on. One way traders find potential is in certain types of data.

Using Options Action To Find Penny Stocks To Watch

Unusual options activity can help uncover penny stocks poised for action. Options trading allows large investors to take leveraged positions with less capital than buying the stock outright. Tracking unusual options flow on penny stocks may reveal where institutions are making big bets, signaling potential catalysts. However, not all unusual options action translates into stock price moves.

Traders use these signals as part of a holistic strategy to discover promising penny stocks while avoiding bad bets. In this article we look at 5 penny stocks to watch with unusual options activity today.

If you’re interested in learning more about using unusual options activity to build a list of penny stocks, we have included a primer for implementing this type of strategy.

Penny Stocks To Watch

Tupperware Brands (NYSE: TUP)

The unusual options action TUP stock has been found in this week’s 10/13 $2 Calls with more than 15,700 contracts traded. There is also a surge of volume in the $2 Calls expiring on 10/20 with more than 4,800 contracts traded.

Hanesbrands Inc. (NYSE: HBI)

Hanesbrands HBI stock options saw an uptick in $5 Call contracts expiring January 19, 2024. More than 2,600 traded at the time of this update.

Rite Aid (NYSE: RAD)

The struggling drugstore brand’s stock has mounted a notable comeback ever since getting put on the list of penny stocks under $1. RAD stock is up more than 100% since hitting 52-week lows at the end of September. As for its options chain, RAD stock unusual options volume can be seen in next Friday’s 10/20 $1 Calls with more than 7,400 traded so far.

JetBlue Airways Inc. (NASDAQ: JBLU)

We wrote about JBLU stock (See: Will JetBlue (JBLU) Be On Your List Of Penny Stocks In 2023?) before gracing the penny stock stage and as share prices took a nosedive last quarter. Now it may seem that some hope for the penny stock to finally take flight. As share prices rebound, options action has picked up. More than 2,500 contracts have traded in the 10/20 $5 Calls in the stock market today, which is where the bulk of the action appears.

WeWork (NYSE: WE)

The beaten-down shared space company saw a pop in WE stock price today to the tune of roughly 20%. Accompanying that move has also been an uptick in options trading action. WE stock’s $3.50 Call expiring November 17, 2023 traded more than 7,800 contracts as of this update.

How To Use Unusual Options Activity To Build A List Of Penny Stocks

Focus on liquidity first when screening for penny stocks with unusual options activity. Volume on the stock and options must be sufficient to allow opening and closing positions easily. Search for options expiring in the next one to two months at most when inspecting unusual activity.

penny stocks to buy unusual options activity volume today

Time decay accelerates the shorter the expiration, so near-month options see more volume. Institutions betting on near-term price swings trade these contracts. Long-dated options often rely more on vague assumptions of future appreciation.

Best Penny Stocks? 3 To Watch In The Stock Market Today

Scan option chains for large trades at ask or bid prices, indicating buying or selling, respectively. Open interest rising rapidly over previous days hints at new positions being initiated. The strike prices and ratio of calls to puts provide clues on sentiment. Calls dominate for bullish trades, with puts skewing bearish.

In The Money, Out Of The Money, & Spikes

Inspect trading on out-of-the-money strike prices, which offer more leverage for less premium paid. Volume surging on both very low and high strikes shows institutions betting on expanded price ranges. At the money, options may also see heavy trade but require close monitoring of open interest flows to detect unusual activity.

Compare option volume spikes to historical norms at each strike. Liquidity varies widely for penny stocks, so unusual activity may be a lower or higher threshold than large cap names. Check trading over previous days and weeks to gauge what qualifies as truly outsized options activity.

Look for news or events corresponding to large option trades to determine rationales. Earnings, analyst ratings changes and clinical trial data releases constitute common catalysts. Beware unsubstantiated hype on message boards fueling unusual options flow.

Penny Stocks, News & Options Correlation

Cross reference penny stocks with unusual activity against short interest data from sites like Heavily shorted names frequently see squeezes when positive news drops. The options trading may signal investors positioning for short covers.

Exercise caution if the penny stock shows a recent history of dilution or offerings. Large option trades may be insiders strategically taking positions before announcing capital raises. Their advantage is new shares depressing prices temporarily after they have established option holdings.

Review valuation metrics like price to earnings and price to sales ratios. Stocks with reasonable valuations have more room for upside based on fundamentals improving. Options activity in wildly overvalued penny stocks rests purely on sentiment shifts which carry higher risk.

Analyzing penny stocks with unusual options flow still comes down to thorough research of the underlying company. Visit their website and read SEC filings to understand the business model and financials. Watch for red flags like paid stock promoters making claims that lack evidence in filings.

In summary, unusual options activity can highlight penny stocks warranting further investigation. But trades must be vetted against liquidity, company fundamentals and recent news before betting capital. With rigorous screening, traders improve their odds of profiting when big investors make huge options plays.

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