Profit Pregame

Decoded: A Lithium Stock Call Buy Signal

 

Is LAC about to pop 20%? Someone thinks so…

Alternative energy stocks have been incredibly hot lately – in case you missed it, Sono Group (SEV) is the new Rivian (RIVN), more than doubling in its Wall Street debut on Wednesday.

But what if you don’t have a load of cash to chase after that hot new EV IPO that’s lighting up the Nasdaq?!

Well… maybe I can interest you in some super-affordable call options on an “EV side hustle” stock that one big-money buyer thinks is on the verge of a 20% spike.

This lithium stock trade surfaced on one of my eight proprietary options scanners earlier this week, and the shares were already off to the races yesterday!

 

How high can lithium go???

Let me break it down for you…

Here’s the Lithium Americas (LAC) trade idea that popped up on one of my custom scanners during Tuesday’s session:

Logo Description automatically generated

And here are 3 reasons why it met my custom criteria:

Volume was higher than open interest.

The “2-4K” in front of the stock ticker represents how many call contracts have traded at that option strike on the day. When volume is higher than open interest (indicated by “OI=1951” above), that means new positions are being added.

How do I know? Well, open interest is the number of calls that have been opened at a specific strike and not yet closed. So even if everyone holding a position on the options were to close out their trades at once, volume would still only be equal to open interest.

When volume is even 1 contract higher than open interest, it means new positions are being opened.

The contracts were low-priced.

These particular contracts were “Over$1,” as you can see in the image above, but my scanners frequently turn up options trade ideas that are below even $0.50 per contract. Generally, I’m looking for anything below $1.50.

Each options contract offers control of 100 shares per contract, so a call priced at $1.25, for example, will actually cost $125 to buy one contract to open.

Because short-term options contracts are a riskier way to bet on a stock’s directional move, I like to focus on low-priced options. This way, I limit my capital commitment – and total dollars at risk – right up front.

The total buy-in was big!

I always target options trades that are worth at least $50K in total – and this LAC transaction fit the bill.

Accounting for thousands of contracts in volume, options priced over $1 per share, and 100 share per contract – this was a solid 6-figure spend on those LAC calls.

And not only that, the trader is looking for a BIG move. As of Tuesday, when these calls traded, LAC was short-sell restricted due to a sell-off in the shares – and even after a 3.5% rally on Wednesday, this strike was still more than 20% out of the money!


LAC on Wednesday via Google Finance
That’s an ambitious bet on fast, aggressive price action using low-priced calls… exactly the type of big spending I love to stalk using my custom options scanners!

And here’s a bonus…

LAC is pretty heavily shorted, too, with roughly 10% of its float dedicated to short interest.

That means a lot of traders are betting on the shares to fall by selling the shares short – but when a heavily shorted stock starts to rally, it can spark what’s known as a “short squeeze.”

That means traders who sold the stock short rush to buy back their losing positions as the stock rallies, which perpetuates more and more buying pressure – in other words, a big old spike higher up the charts.

How I find the next big squeeze

Hot new stocks like electric vehicle newcomer RIVN have been the latest to shoot higher on Wall Street – but I’m not waiting around for a blockbuster IPO listing to find the next stock that’s ready to rip.

Instead, I’ve nailed down a strategy to help me find the hot names that the “retail army” is about to pile into… and send soaring “to the moon.”

I’m calling this meme-inspired trade strategy Super Squeeze Profits – and you can learn all about it right here.

Heavily shorted stocks have the potential to “squeeze” sharply higher – sometimes for just one day, and sometimes for days or WEEKS at a time.

And by maximizing that high-velocity short squeeze move with the leverage of call options, even individual traders can find ways to catch a piece of the unprecedented opportunities in this profit-ripe market.

See what Super Squeeze Profits is all about, then join me today.

You never know when the next stock is going to pop off!

Join me LIVE today for hot options scan ideas!

I’ll be in the Money Morning LIVE main room today at 11:30 AM Eastern for a FREE, live scan session that’s open to all of my Profit Pregame subscribers.

Just click right here to join the room, add your questions to the chat, and enjoy some lunchtime trading with yours truly!

WATCH MY LIVE SCAN
See you there!

Andrew Keene

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