Trade Alert: Top Names + Short Squeeze
A bullish options bet on one of our top ten names that's also one of the most shorted stocks in the market now. Plus, a follow-up trade on a microcap turnaround story.
A Short Squeeze Sequel
Yesterday, ZeroHedge quoted Goldman Sachs trader Ryan Shakey saying the current market environment reminded him of the meme stock craziness of 2021. In that post, ZeroHedge included this chart of stocks with the highest short interest as a % of float.
One of those stocks appeared in Portfolio Armor’s top ten names as of Tuesday’s close. Today, we’re going to place a bullish options bet on it.
Another Experiment That’s Panning Out
When the market was tanking back in March, we placed a few experimental trades.
One was a bullish trade on Tesla (TSLA 0.00%↑), which we exited for a >300% gain last month. Another was a bullish bet on a microcap ad tech stock which is has started to rip higher over the last week. It looks like word of the company’s recent pivot may have started to spread. This is the bull case for it, in a nutshell:
Business model is shifting from a low‑margin ad network to a managed, self‑serve offers platform that could support ~90% gross margins.
Flagship customer just renewed through 2028. That undercuts the popular “they’re getting replaced in‑house” bear thesis.
New vertical opening: consumer‑packaged‑goods coupons delivered seamlessly through large national retailers. If it scales, that’s a fresh budget pool (trade/CPG spend) vs. traditional retail offers.
Market cap is tiny and screens ugly because the transition depressed near‑term revenue. That’s exactly where mis-pricings live.
Well, it may not be mispriced for long. Our second trade today is a follow-on bullish bet on that microcap, which also happens to have double-digit short interest—not enough to put it on that ZeroHedge table, but maybe enough to juice its move from here.
Details below.
Today’s Top Names + Short Squeeze Trade
The stock is Groupon (GRPN 0.00%↑), and our trade is a diagonal spread buying the $36 strike call expiring on August 22nd, and selling the $42 strike call expiring on August 8th, for net debit of $2.30. The max gain on 1 contract is uncapped, the max loss is $230, and the break even is with GRPN at $38.30. This trade filled at $2.30.
Today’s Microcap Follow Up Trade
The stock is Cardlytics (CDLX 0.00%↑), and our trade is a diagonal risk reversal, consisting of two parts:
Buying the $5 strike calls expiring on January 16th for $0.60. This trade filled at $0.54.
Selling the $3 strike puts expiring on August 15th, for $0.60. This trade filled at $0.60.
With risk reversals, our upside is uncapped, and our risk per contract is the premium we pay for the call + the value of 100 shares of the stock at the put strike price - the premium we got for selling the put. It’s roughly similar to the risk of buying the stock, so it’s best used when you’d be willing to do that.
Exiting These Trades
GRPN: I’m going to open a GTC order to exit the diagonal spread at a net credit of $7. If that doesn’t fill before the short call expires on August 8th, we can revisit the exit price on our long call. Note: if our short call is in-the-money on August 8th, we want to make sure it gets closed out during market hours. Our GTC order to exit at a net credit of $7 should do that, but if it doesn’t, let’s adjust it down.
CDLX: I’m going to open a GTC limit order to sell half the calls for $1.80, and aim to exit all of them before expiration. The short put options will either expire worthless, or we’ll end up owning shares of CDLX.
I'm lowering the limit price on the $5 strike January CDLX calls to $0.10.