Why Investors Need to Be Leery About the Options Surge in Arcimoto (FUV)

At first glance, circumstances seem favorable for the electric vehicle industry, including risky enterprises such as Arcimoto (FUV). With inflation still considerably elevated against historical norms – despite improvement in the matter – more people are looking to EVs as a viable transportation and mobility alternative. Further, unusual options activity for FUV stock bolsters contrarian sentiment. Nevertheless, prospective investors need to be extremely cautious.

Fundamentally, Arcimoto manufactures small vehicles and their classification varies from state to state. For instance, in California, the Golden State regards Arcimoto’s so-called Fun Utility Vehicle (FUV) as an enclosed three-wheel motorcycle. While neither a motorcycle endorsement nor a helmet is required for operation, the motorcycle classification may have strong implications regarding insurance coverage. Generally speaking, insurers are cautious about covering lightweight vehicles.

Taking this issue aside, FUV stock itself is radically risky. Although Arcimoto got off to an auspicious start to 2023, circumstances went off the rails following the close of the Jan. 17 session. Further, in the trailing five days, FUV dropped 10% of equity value. But that doesn’t come close to what it hemorrhaged in the trailing year – a staggering implosion measuring 98.31%.

Fundamentally, Arcimoto continues to misfire. True, for the third quarter of 2022, the company topped the consensus target for revenue. Posting sales of $2.02 million, the EV maker beat the Zacks Consensus Estimate by 68.67%. Unfortunately, it’s not a steady performance, with the company beating the consensus sales target only two times out of the last four quarters.

Additionally, Arcimoto “came out with a quarterly loss of $0.38 per share versus the Zacks Consensus Estimate of a loss of $0.39.” Extending from the loss of 31 cents from the year-ago period, Arcimoto is big on aspirations but short on results. Nevertheless, FUV stock became the subject of unusual activity in the derivatives market.

FUV Stock Sees Options Volume Spike

After the closing bell rang out for the Jan. 24 session, FUV stock represented one of the highlights in Barchart.com’s screener for unusual stock options volume. This stat shows the difference between the current volume and the average volume over the past month. Typically, traders advantage this data to determine which stocks may be due for big moves ahead.

Specifically, FUV’s volume level reached 5,007 contracts against an open interest reading of 32,353. Call volume hit 5,000 contracts versus put volume of 7. Further, the delta between the trailing-month average total volume versus the prior session volume came out to 988.48%. The implied volatility (IV) rank hit 0%, which indicates the (at the money) average IV relative to the highest and lowest values over the trailing one-year period.

To summarize, IV signifies the expected volatility of a stock over the life of an option. As certain influencing factors for the underlying investment changes, the IV will likely change as well. Further, as demand for an option increases, so too will its IV.

The IV low for FUV stock was naturally 0% today. Just over a month ago, FUV hit its IV high of 517.23%. Prospective investors should note that per Barchart.com’s technical analysis gauge, FUV ranks as an average 100% sell. Across the entire time spectrum (short, medium and long term), all signals point to a bearish outcome.

Unsurprisingly, not many analysts cover FUV stock. Three months ago, FUV received a consensus “hold” rating, broken down as one strong buy and one strong sell. In the current month, both the assessment and the individual ratings remain the same.

Finally, the 60-month beta for the company pings at 2.32. This stat indicates substantially more volatility than the benchmark equities index.

Beware the Dangers of Contrarian Trading

Earlier this month, FUV stock may have jumped higher based on a possible short-squeeze attempt. For instance, data from Fintel noted that on Jan. 11, Arcimoto’s short interest hit 25.86% of its float. While not particularly elevated, its short interest ratio reached 2.12 days to cover. However, earlier today, FUV’s short interest was only 8.92% of float, with the short interest ratio being 0.20 day to cover.

Without a realistic prospect of a short squeeze at this juncture, bulls of FUV stock must depend on underlying fundamentals. Unfortunately, with the EV maker consistently losing money, going long on Arcimoto is an incredibly risky proposition.

Moreover, investors only need to look at recent history to recognize the bull trap in FUV stock. On Nov. 11, Zacks Equity Research pointed out that Arcimoto shares may soon find technical support. Sadly, though, FUV continued to plunge. At the time of publication, shares traded for $12.89 a pop. At time of this writing, they’re down to six pennies above $2.

To be clear, this is not meant to slight Zacks in any way. Rather, it’s to warn prospective traders, even outright gamblers. Though Arcimoto features a reputation of occasionally posting encouraging stats, the long-term trajectory of FUV stock has been consistently negative. Not much appears to have changed despite the options activity spike, thus warranting extreme caution.

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