Unusual Options Activity: 5 Calls That Grabbed My Attention This Week

In past installments of Unusual Options Activity, I’ve generally stuck to analyzing options from a single day of trading. Today, I’ve chosen to spread the love over the past week, selecting one call option from all five trading days. 

To qualify for inclusion, a call option must meet three criteria:

1. The days to expiry (DTE) must be 28 or greater. 

2. The volume must be 10,000 or greater. 

3. The volume/open interest (Vol/OI) ratio must be 10 or greater. 

Some of the companies I’ve chosen have deficiencies that I would consider severe enough that it would prevent me from holding them over the long haul. However, one person’s garbage is another person’s gold. 

Aug. 1 - Rivian

First up is the California-based electric vehicle (EV) manufacturer. Rivian (RIVN). The company announced in late July that it would lay off approximately 6% of its 14,000 employees to control rising costs. 

However, the EV maker of the R1T pickup and R1S SUV are getting rave reviews about its products. MotorTrend named the R1T the 2022 Truck of the Year. In early July, the company announced that its production for the second quarter was 72% higher than in Q1 2022. It produced 4,401 in the quarter. The number includes the two consumer vehicles and the EDV 700 commercial vans. 

For all of 2022, Rivian’s goal is to produce 25,000. It will have to produce a little more than 18,000 between July and December to get there. The big negative: it lost $1.6 billion in the second quarter on $597 million in revenue. 

As for the call option, I’ve selected the Oct. 21 $50 contract. On Monday, it had a volume of 10,374, good for a Vol/OI ratio of 18.17. The ask was $0.96 with a DTE of 81. Rivian’s Aug. 4 closing price was $36.18. This means it’s got to increase almost 41% over the next 11 weeks to break even. 

I wouldn’t say I like its chances. 

Aug. 2 - Vinco Ventures

I’m not going to spend much time discussing Vinco Ventures (BBIG) because it’s a business I believe most retail investors shouldn’t own--and not just because it trades under $1. 
In the past two years, the company has rolled up several businesses focused on commercializing digital media, advertising, and content technologies. Despite generating just $11.5 million in revenue in Q1 2022, it has more than 210 million shares outstanding. That’s a lot for such a small business. 

I wouldn’t touch this meme stock with a 10-foot pole. 

However, the Jan. 20/2023 $2 call has a DTE of 171, giving it almost half a year to hit a breakeven of $2.17. Given its Aug. 4 closing price of $0.71, its share price has to appreciate by 206% to get to breakeven. The volume on Tuesday was a whopping 28,388, 40.15x its open interest. 

Given the volatility of meme stocks, I like the option much better than the stock. 

Aug. 3 - Urban Outfitters

Urban Outfitters (URBN) has had its ups and downs. That’s a function of the retail industry, which can be as volatile as they come. The SPDR S&P Retail ETF (XRT) is down 27.3% year-to-date and 30.7% over the past 52 weeks. URBN is one of 100 retailers held by the ETF. 

As for Urban Outfitters’ business in 2022, things aren’t all that bad.

It reported Q1 2022 earnings in late May. Revenue increased 13.4% to a record $1.05 billion, while its net income was $31.5 million, 41% lower than Q1 2021. Its profits were lower due to higher costs. Its gross margin in the quarter fell 170 basis points YOY to 30.7% on those higher costs. 

As for Anthropologie, the company’s largest brand, it had same-store sales growth of 18% during the quarter. Urban Outfitters and Free People had same-store sales growth of 1% and 15%, respectively. 

One thing to watch for: Nuuly, the company’s clothing rental and resale marketplace, had sales of $22.8 million during the quarter, 192% higher than a year earlier. That could be a diamond in the rough.   

URBN is trading at 0.44x sales, its lowest P/S ratio over the past decade. Down 30.3% YTD and 45.4%, now might be a good time to make a risk-on investment.     

As for the call option, the Sep. 16 $21 contract has 44 days to expiry. It had a volume of 10,613, 20.10x the open interest on Wednesday. The ask was $1.90, so the breakeven is $22.90, 10% higher than its Aug. 4 closing price. 

Six weeks to make 10% seems like a good risk/reward proposition. 

Aug. 4 - Fisker

I love the look of the Fisker (FSR) Ocean SUV.

So, when I saw the Fisker Sep. 16 $15 call option had unusual options activity on Thursday, I couldn’t help but include a second U.S. EV maker in my selections. 

The option’s volume of 13,814 was 21.62x its open interest. With a DTE of 43, the 17-cent asking price isn’t steep. However, the $15 strike is. Compared to the URBN call – which had the same expiration date -- FSR will have to appreciate by 46% over the same period, more than 4x Urban Outfitters. That seems like a big ask.

Fisker announced this week that it still intends to begin production of its Ocean SUV in November. Approximately 5,000 people have made $5,000 preorder deposits. Those will have to be filled by the end of the year. On top of that, Fisker has 51,000 reservations on file. Once the Ocean hits the streets in volume, you can be sure the sales will accelerate.

It’s a nice-looking vehicle.

As for which of the EV makers to choose as a long-term investment, it’s a toss-up. They both could become major players in the EV market. However, both of their options look like losing propositions. 

I guess we’ll see in about six weeks.    

Aug. 5 - Ford

As I write this, it’s still relatively early in Friday trading, and the Sep. 2 $17 Ford (F) call option is exhibiting the most unusual options activity on the last day of the week.

One hour into Friday trading, the volume is 14,824, 18.32x the open interest of 809. The $17 strike price is $1.63 higher than the Aug. 4 closing price. Add in 21 cents for the ask, and you’re looking at a breakeven of $17.17, 12% higher than the Aug. 4 close. 

Ford’s stock had a strong month in July, gaining 32%, its best monthly gain since April 2009. Between announcing good Q2 2022 earnings -- revenues were greater than $40 billion for the first time since 2019 and $3.7 billion in adjusted EBIT -- and increasing its quarterly dividend to $0.15, 50% higher than Q1 2022, the company’s on a roll.

For all of 2022, Ford expects adjusted EBIT of $12.0 billion at the midpoint of its guidance, 20% higher than 2021. Down almost 26% YTD, this particular Ford call option looks like a good play over the next month.

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