Wednesday’s options trading was relatively busy yesterday, with total options volume nearing 41 million compared to a 30-day average daily volume of just under 39 million.
The puts (62%) heavily outweighed the calls (38%), with 709 stocks exhibiting unusual options activity. As has been the case in recent weeks, Tesla’s (TSLA) volume led the way. Six of the top 10 options by volume yesterday were Tesla calls or puts. That’s unlikely to change early in 2023.
Away from the high volumes of Tesla and some of the country’s largest companies, I found two stocks that exhibited unusual options activity yesterday that could be worth pursuing.
BGC Partners Gets a New Name
The history of BGC Partners (BGCP), a financial services company that provides brokerage services to other financial-related companies, dates back to October 2004, when it was spun off from Cantor Fitzgerald.
Over the past 18 years, its stock has traded sideways or lower. Over the past five years, it’s lost 75% of its value. This is not a stock you want to own in a tax-advantaged account.
However, several things have happened in recent months that suggest the Aug. 18/2023 $4 call contract with a $55 premium is worth considering.
First, the company announced in mid-November that it was simplifying its corporate structure from an Umbrella Partnership/C-Corporation (Up-C) to a Full-C Corporation.
BGC Partners Inc. and BGC Holdings L.P., a consolidated subsidiary of BGC Partners, own 100% of the limited partnership interests in BGC Partners L.P. (U.S. business) and BGC Global Holdings L.P. (international business). These two LPs are BGC’s two operating partnerships.
Upon completion of the corporate conversion, the limited partners of BGC Holdings L.P. will have their interests converted into Class A and Class B shares of BGC Group Inc., the new name of BGC Partners. Accordingly, the stock symbol will lose the P, changing to BGC. It will continue to trade on Nasdaq.
“With the execution of these agreements, the Company will move rapidly with its conversion to a simpler, more transparent corporate structure. We believe increasing simplicity, while reducing operational complexity, will deliver tremendous value to BGC,” stated BGC CEO Howard Lutnick.
Secondly, on November 14, the company’s Fenics GO trading platform was named the OTC Trading Platform of the Year by Risk.net at the Asia Risk Awards 2022.
“As the only electronic platform serving the interdealer market for large-sized equity index option trades, BGC's Fenics GO finds itself in a fortuitous position, and has gradually been extending its reach into Asia with the introduction of a range of new products serving popular Asian underlyings,” stated Risk.net in the BGC press release.
As BGC stated in its 2021 annual report, Fenics accounted for 22% of its overall revenue in 2021, excluding insurance -- it sold its insurance business on Nov. 1, 2021, for $535 million -- compared to 5% of the company’s overall revenue in 2011.
Its Fenics revenue has grown five-fold over the past decade. In 2021, they grew by 26%. As of Q3 2022, they accounted for more than 25% of BGC’s overall revenue. As it continues to convert more of its existing business to the Fenics GO platform, revenues and profits will continue to grow.
There are 231 days left in the call contract. Its share price needs to rise 19% to break even. With a delta of 0.52536 and just a $55 premium, I like the risk/reward potential.
No Risk, No Reward
The second option on my radar from Wednesday’s trading is a company I don’t know much about. Still, I find its business very interesting, given the housing shortage in North America.
Safe & Green Holdings (SGBX) creates prefabricated modular structures from wood, steel, and shipping containers. It got its start in 2007 as SG Blocks. On Dec. 22, the company changed its name to Safe & Green Holdings, in part to better reflect the nature of its business.
On Dec. 23, the company announced that it was spinning off 30% of its Safe and Green Development Corporation to existing shareholders.
“Safe & Green Holdings Corp. plans to continue expanding as a leading provider of modular solutions in the United States. Safe & Green Holdings Corp. will remain the platform that will oversee any future subsidiary spin off, IPO or other strategic initiatives,” stated Paul Galvin, Chairman and CEO of Safe & Green Holdings Corp.
Safe & Green Development recently obtained a fairness opinion for its business. Advisory firm ValueScope valued the division at $74.3 million. That puts the value to SGBX shareholders at $22.3 million, more than Safe & Green’s current market cap of $14 million.
In early December, the company’s development business entered into an agreement with SG Echo, Safe & Green Holdings’ manufacturing subsidiary, to provide 800 one and two-bedroom modular structures at the company’s Magnolia Gardens development in Durant, Oklahoma.
The first phase is between 100-150 units. The total revenue from this development is an estimated $130 million.
To give you an idea of what this would mean to SGBX stock, the company’s total revenue through the nine months ended Sept. 30 was $20.3 million, $8.6 million from construction, and $11.6 million from the medical-related business.
The company deployed its modular units to healthcare facilities during the pandemic. In the first nine months of 2022, its medical revenues fell by more than 50%. There is no question its construction business is the company’s best hope.
This second stock is only for speculative investors.
It is currently working with the Securities and Exchange Commission to get a significant shareholder to report their holdings under Section 13 of the Exchange Act. So far, to no avail, making a bet on Safe & Green even more speculative than it already is.
However, with a delta of 0.73042, a break-even of $1.65, and 232 days to expiration, the potential upside on the call option’s ask price is intriguing.
More Options News from Barchart
- Are SPACs Making a Comeback in 2023? Perhaps Not Yet.
- Protecting Against A January Volatility Spike
- Amazon Shows Large Unusual Options Bullish Activity with Calls
- Unusual Options Activity Points to Turbulence for Southwest Airlines (LUV)
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes.
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