Unusual Options Activity: Newegg Commerce (NEGG)

Shares of ecommerce platform Newegg Commerce (NEGG) traded in a narrow range for the past few months, before exploding more than 300 percent higher in recent sessions. One trader expects that move higher to continue in the next few days.

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  • That’s based on the July 16 $30 calls. With 8 days until expiration, over 3,140 contracts traded against a prior open interest of 112 for a 28-fold jump in volume.

    In recent sessions shares have jumped from around $10 to about $62. The $30 call represents a deep in-the-move option following shares moving over 100 percent higher on Wednesday amid multiple trading stops.

    The company completed a reverse merger with its parent company in late May, and has been providing a lottery for sold-out GPUs in recent days which may be attracting investor interest.

    Action to take: The company was slightly profitable when it completed its reverse merger, and sported 70 percent revenue growth last year. The recent jump higher in shares could lead to a quick return on this call option, but traders might want to look for a pullback instead. The recent chart price is a clear parabolic move higher. Those tend to reverse heavily and give back the bulk of their gains in a short amount of time.

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  • A trade like the November $10 puts, last going for about $1, might be a better way to play this current jump higher in shares as it comes back down to earth.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may make a trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.