Unusual Options Activity: The Geo Group (GEO)

Shares of for-profit prison firm The Geo Group (GEO) saw a massive jump in shares, with the stock price moving as much as 50 percent higher at times on Wednesday. At least one trader sees further jumps in shares likely in the next week.

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  • That’s based on the June 18th $20 calls. Over 12,200 contracts traded against a prior open interest of 110, for a similar 110-fold rise in volume. The buyer of the options paid about $0.23.

    With shares under $9, in order for the option to close in-the-money, shares would need to more double. With the trade closing in a week, that looks unlikely, even with some big intraday moves.

    The company has fared somewhat flat operationally. Shares have generally been sliding steadily over the past year, and concerns that the Biden administration may move to end for-profit prisons makes the stock a risky one.

    Action to take: This option, expiring in a week and one that will only profit if shares double, is typical of the “YOLO” trades that some retail investors are making right now. While the trade may tick up at some point in the next week, the odds of the trade going completely bust remain high.

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  • Traders who see a further upside in shares may want to use a more reasonable strike price, and give the trade more time to play out. Looking at a longer-term chart, traders may want to look at selling options such as this in the expectation of them going to zero, or buying put options when shares have large, outsized rallies like Wednesday’s.

     

    Disclosure: The author of this article has no position in the stock mentioned here, and does not intend to make a trade this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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