Trade Alert: Two Lottery Tickets

Bullish bets on two sub-$5 stocks.

Two Lottery Tickets

Both of these stocks were trading under $5 per share as of yesterday’s close.

Stock #1

The first one was one of our top ten names last night.

It does Bitcoin mining, but unlike other Bitcoin miners, it’s also involved in the second largest cryptocurrency by market cap, Ethereum (technically, I think Ethereum is the blockchain and “Ether” is its cryptocurrency, but whatever).

And it also has some sort of exposure to artificial intelligence.

For a low-priced stock, it has a surprisingly healthy balance sheet, with no debt. Chartmill gives it a health rating of 8 out of 10. If we get a crypto rally after the election, this stock could move.

Stock #2

Two months ago, we had a nice, 100%+ return on an options bet on a former high-flyer, a stock that benefited from the COVID lockdowns, Zoom Video Communications (ZM 0.00%↑).

Like Zoom, today’s stock is a former, COVID-era high-flyer. Last month, I noticed that hedge fund manager David Einhorn had picked up shares when it was trading under $4 per share. I thought that made sense, but didn’t buy at the time. Then it released earnings, suggesting that the company’s turnaround is starting to bear fruit. It’s about a $1 higher than where Einhorn bought it, but it should have plenty of upside from here if subsequent quarters confirm its turnaround story.

One of the best analysts I follow on X and Seeking Alpha was a bear on this stock earlier this year, and has turned into a raging bull on it.

You’d could simply buy shares in either of these stocks, but I’m going to buy options instead, for some added leverage and a chance at even higher returns.

Details below.

Bullish Trade #1

The company is Bit Digital (BTBT 0.00%↑), and our trade is buying the $3 strike calls expiring on February 21st, for $0.75. The max gain on 5 contracts is uncapped, the max loss is $370, and the break even is with BTBT trading at $3.75. This trade filled at $0.75.

Bullish Trade #2

The company is Peloton Interactive ( PTON 0.00%↑), and our trade is buying the $5 strike calls expiring on April 17th for $1. The max gain on 4 contracts is uncapped, the max loss is $400, and the break even is with PTON at $6. This trade partially filled at $1. The rest of this trade filled at $1 on 9/17/2024.

Exiting These Trades

Let’s see where these stocks trade after their next earnings release. If there’s a big move, we can sell half of our contracts, as we did with TZOO 0.00%↑ and RIVN 0.00%↑ earlier this year, and hold the rest to see if we can get bigger gains closer to expiration.