Are penny stocks worth it? That’s a question that we’ve gotten from a lot of new traders in the stock market today. The topic is becoming even more popular with volatility running rampant and so many well-known names hitting fresh lows. As discussed in the article “Will AMC Entertainment (AMC) Be On Your List Of Penny Stocks In 2022?” penny stocks aren’t just start-ups. There are plenty of established and notable brands actually trading below $5. That trend has amplified this year thanks to the stock market crash.
The latest company to fall victim to extreme selling was Faze Holdings Inc. (NASDAQ: FAZE). The massively popular esports and entertainment brand has dropped from over $24 to under $5 in about one month. The latest nail in the coffin came from news that the company submitted a filing showing plans to issue millions of shares of FAZE stock. With dilution as the speculative catalyst, traders took this as a sign to exit. Today we see the impact on its share price.
Some of the other high-profile name stocks trading at penny stock levels right now include:
- Aurora Cannabis (ACB)
- PLBY Group (PLBY)
- Virgin Galactic (SPCE)
- Canopy Growth (CGC)
- Traeger Inc. (COOK)
- Tattooed Chef (TTCF)
- FuboTV Inc. (FUBO)
- SoFi Technologies (SOFI)
As well as a slew of other household name stocks.
How To Find Penny Stocks To Buy
Whether or not you’re looking for such “household name stocks” or not is secondary to the reason you’re looking for penny stocks to buy in the first place. That reason is to make money trading in the stock market. Today we look at a handful of penny stocks to watch that have one thing in common: unusual options activity.
If you’re new to trading options, here’s some information from our article Trading Options 101: A Beginner’s Guide, you might find helpful:
An options contract offers the buyer the opportunity to buy or sell the underlying asset depending on the type of contract they hold. Unlike futures, the holder is not required to purchase or sell the asset if they decide against it. Each contract will have a specific expiration date by which the holder must exercise their option...The options contract offers buyers two types of options concerning rights that can be acquired with varying options contracts: Call options give buyers options in relation to purchasing stocks at a stipulated time in the future. In contrast, Puts offer them options regarding selling a certain amount of shares they own at a particular time in the future.
It’s also vital to note that all volume isn’t only buying volume or selling volume. Options can also be shorted by selling to open a position. Buys and sells simultaneously (spreads) are also something to factor in as traders look to take advantage of specific stock trends. However, traders will generally use Call volume, Put volume, and open interest to determine if bullish or bearish sentiment is favored.
Penny Stocks To Watch Today
Amyris Inc. (NASDAQ: AMRS)
Since August, Amyris has been on the move thanks to a mix of solid earnings, a massive backlog, and guidance that it will hit 150% year-over-year growth in consumer revenue. Amyris specializes in “clean beauty” brands.
CEO John Melo has high hopes for the second half of the year. In the August financial results update, Melo explained, “We are entering the second half with a consumer business that we expect to deliver accelerated growth year-over-year, and a $15 million ingredient backlog for shipping in the second half. We have a robust outlook for the remainder of the year and our guidance remains intact. We have visibility to over $700 million of funding and cash inflow from earnouts with $200 million expected during the third quarter.”
Other than a recent US Trademark application filed for its Ecofabulous to include digital media (including collectibles, art, tokens, and NFTs), traders have paid close attention to the short interest in the penny stock. Data from Fintel.IO and TDAmeritrade put the AMRS stock short float percentage between 19% and 21%.
On top of that, options traders seem to have taken some bullish bets in the near term. As of this article, Friday’s October 7th $3.50 Call lit up the scanners with more than double the volume compared to open interest. This comes shortly after analysts at Piper Sandler nearly doubled their price target from $2.50 to $4.[Read More] Penny Stocks Basics: What Is A Stock Broker?
Ardelyx Inc. (NASDAQ: ARDX)
Another one of the penny stocks gaining the interest of options traders in the stock market today is Ardelyx. The “unusual” part of this story is the long-dated Call volume for January 20, 2023, $1.50 strike. No other strike and expiration saw anywhere close to that volume level; only two other strikes and expirations had higher open interest.
Ardelyx is also a favored stock of some top Wall Street funds. In our article 4 Hot Penny Stocks To Buy Now According To Top Hedge Funds, we discussed some of the notable names holding positions in ARDX stock. Steven Cohen’s Point72 Asset Management, Millennium Management, Citadel Advisors, BlackRock, Jim Simons’s Renaissance Technologies, and Vanguard Group are among the top names.
Ardelyx’s IBSRELA is its first approved product in the U.S., recently launched to treat IBS-C in adults. It has additional pipeline candidates that could garner attention this year, including its XPHOZAH for hyperphosphatemia. A meeting of the Cardiovascular and Renal Drugs Advisory Committee is tentatively scheduled for November 16, 2022. This may be the source of speculation in the options market.
Transocean Limited (NYSE: RIG)
Energy stocks have been red hot this year, and Transocean is no exception. The company provides offshore drilling services for oil and gas wells. Since late September, it has been on the rebound path. The company announced two significant milestones over the last few weeks that have helped give a boost to the market. First, news of a contract for its harsh environment semi-submersible Transocean Norge piqued interest last month.
The award offers exclusive rights to drill all Wintershall Dea Norge wells and OMV Norge’s respective drilling campaigns from 2023 to 2027. If all approvals are granted, Transocean said that the full contact period of 1,071 days would have an average dayrate of $408,000, contributing to $437 million in the backlog.[Read More] Best Penny Stocks To Buy Now? 3 To Watch Today
This week Transocean inked a deal with Salunda Limited for Transocean’s HaloGuard real-time zone management technology. The platform offers location tracking with a machine vision system to locate personnel on the drill floor during operations.
While there is already significant open interest in both Calls and Puts at numerous strikes & expirations, the contracts in focus today are the November 18th $3 Calls. There was nearly three times the volume compared to Open Interest in the stock market today, with 21,800+ traded by the time this article was written.
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