The last few days has been a feeding frenzy in the options market as a potential infrastructure vote appeared to be close. It’s not hard to work downstream from this spending behemoth to identify who might be a beneficiary of the passage of the policy. Clearly the options market on Thursday decided to pull the trigger on a wide array of EV names. My first thought in seeing this was a Wall Street movie quote from the 1987 film, “Blue Horseshoe loves Bluestar Airlines. Got it?” However, in this case the benefactor is Congress, and every large investor is in on the rather large tip they’re giving. The only question is whether news that House Speaker Pelosi’s planned vote is in trouble will mean for the increased bullish interest.
What is Unusual Option Interest?
Before we get to the nitty gritty, you must understand what unusual option activity is and the benefits of options. First, options provide limited risk and unlimited upside potential, which is great when you’re betting on the passage of an infrastructure deal. The second is the machinations in the options market are more obscure, but eventually has the power to accelerate stock movement. This is referred to as gamma.
Since we’re talking about institutional level interest in these trades, that means thousands of contracts are being traded, frequently in large blocks. Unusual option activity can be identified by large single prints of 2000 contracts or more, but also when thousands of contracts are traded quickly. The increased interest leads to higher-than-average volume and a high percentage of the calls or puts being filled at the ask.
Infrastructure Option Activity
I watch this type of activity all the time and will frequently see multiple names see large activity on the same day, but nothing compares to Thursday on the excitement of an infrastructure deal. For the purpose of this list, I’m going to be sticking with EV names, but there has also been significant interest in solar names like First Solar Inc (NASDAQ: FSLR), Invesco Solar ETF (NYSEARCA: TAN) and other ETFs.
Here is a breakdown of Thursday’s EV activity.
- Fisker Inc (NYSE: FSR)
- 44,000 29 OCT 21 $16 calls mostly BOT @ $0.21 to $1.22
- Kandi Technologies Group (NASDAQ: KNDI)
- 7,200 19 NOV 21 $5 calls mostly BOT @ $0.09 to $0.34
- Electrameccanica Vehicles Corp (NASDAQ: SOLO)
- 8,400 5 NOV 21 $4 calls mostly BOT @ $0.05 to $0.21
- Workhorse Group Inc (NASDAQ: WKHS)
- 10,500 12 NOV 21 $8 calls mostly BOT @ $0.25 to $0.64
- XL Fleet Corp (NYSE: XL)
- 5,300 19 NOV 21 $7 calls mostly BOT @ $0.14 to $0.25
- Lordstown Motors (NAQSDAQ: RIDE)
- 4,000 5 NOV 21 $6 calls mostly BOT @ $0.06 to $0.17
- FuelCell Energy Inc (NASDAQ: FCEL)
- 16,000 5 NOV 21 $8 calls mostly BOT @ $0.21 to $0.52
Conclusion
I probably missed some activity, but you hopefully get the point of what institutions think about the infrastructure bill. The downside for taxpayers footing the bill is that these companies haven’t exhibited anything remotely close to profitability, positive operating cash flow, nor have exhibited any economies of scale. However, that’s ok. I’m sure the magical thinking that oozes from Congress will be able to make it up in volume as they always do.
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