Unusual Options Activity: Vinco Ventures (BBIG)

Shares of product research company Vinco Ventures (BBIG) have quadrupled in recent sessions. One trader sees the possibility for a surge even higher.

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  • That’s based on the October $20 calls. Over 10,173 contracts traded against a prior open interest of 111, for a 92-fold jump in volume. The buyer of the calls paid about $1.33 to make the trade.

    With shares trading around $10 on Wednesday, they’d need to rally over 100 percent in the next 43 days before expiration for the option to move in-the-money.

    While that seems like a stretch, the current rally in shares started at around $2.50 just over a week ago. Shares have been heavily mentioned in internet chat rooms in recent days, making this a potential meme stock retail trade.

    Action to take: Shares potentially have further upside here, given the amount of money going into call options like this one. The company is currently unprofitable and losing money, although does have nearly no debt and over $1.10 per share in cash, which made it attractive when it traded around $2.50 just one week ago.

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  • Traders should follow the trend, but recognize that it may fizzle out within a few days. Given that the options are likely to lose their value entirely, traders may want to buy shares here and look for a quick mid-double-digit gain.

    Those who do buy the calls should look for the first sign of trouble that the rally in shares is ending to take profits.

     

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

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