Some of the most speculative ideas are the targeted short-squeeze stocks. To better understand what’s going on, it’s helpful to think of a timed chess match. If you have all day to think about your next move, you will be less likely to blunder your pieces. However, when you have only five minutes in the match, you need to think fast, which then accelerates the possibility of error (both for you and your opponent).
Similarly, short-squeeze stocks are all about pressure. While the bears may be heavily levered to the short side, all it takes is some rumblings on the long side of the equation – combined with good old-fashioned panicking – to get the underlying security moving in the desired direction; in this case, up.
If you’re thinking this practice is speculative, you’re 100% correct. This isn’t about investing per se but rather picking up short-term profits. But if the affected securities continue to rise, hey, all the better. With that, below are short-squeeze stocks that actually might make sense.
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Based in Minnesota, Celcuity (NASDAQ:CELC) is a biotechnology firm specializing in targeted therapies that aim to disrupt the oncogenic (tumor development) process. Since the beginning of this year, CELC dropped nearly 27% of its equity value, making it a naturally viable bearish idea. However, it could be a contrarian case of short-squeeze stocks to buy.
On Fintel’s Short Squeeze Leaderboard, CELC ranks number 25. Although CELC only prints a short interest of 6.79%, its short interest ratio stands at 94.45 days to cover. However, the bears that are betting against Celcuity might not be taking into account its volatility smile or the implied volatility (in the options market) of CELC contracts at various strike prices.
True, CELC features heavy implied volatility (IV) of 3.72 and 3.75 at strike prices of $2.50 and $5. However, IV also rises from 0.82 at $10 to 3.93 at $22.50. This dynamic implies that while some traders are hedging against severe downside risk, they also recognize CELC’s upward potential. Therefore, it’s one of the short-squeeze stocks to watch carefully.
Shift Technologies (SFT)
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Before I get blasted for mentioning Shift Technologies (NASDAQ:SFT), I recognize that the company is wildly risky. As an online marketplace for buying and selling used cars, it appears that this ship has sailed. Without the COVID-19 catalyst to bolster contactless services, Shift may be on a fundamental island. Certainly, its market performance doesn’t offer much encouragement to conservative investors.
However, for speculators of short-squeeze stocks, SFT might be interesting. Currently, it ranks number 34 in Fintel’s Short Squeeze Leaderboard. It prints a short interest of 9.23% of its float against a short interest ratio of 30.62 days to cover. However, traders should consider the volatility smile before making a decision.
Basically, IV largely rises, from the lower strike price to the higher, indicating speculative interest for far out-of-money (OTM) SFT options. Specifically, IV rises from 3.69 at the $2.50 strike to 4.35 at $15. You don’t want to read too much into the data. However, a possibility exists that SFT could spike higher, if only as a dead-cat bounce.
RumbleON (RMBL)
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Headquartered in Irving, Texas, RumbleON (NASDAQ:RMBL) is an omnichannel dealer for the power sports (i.e. motorcycle) industry. Fundamentally, one of the challenges involved with the enterprise may be the lack of interest in motorcycles among the younger generation relative to older demographics. For example, in the trailing one-year period, RMBL fell a disheartening 64%, naturally attracting the bears.
Still, RMBL might be one of the short-squeeze stocks to speculate on. Per Fintel’s leaderboard, RumbleON ranks as number 22. However, the volatility smile for the security’s options contracts indicates possible bullish interest. Yes, IV at the $2.50 strike price is elevated at 2.93. At the same time, IV rises from 0.82 at the $7.50 strike to 4.85 at $22.50.
To be sure, IV doesn’t necessarily offer a trajectory-based insight. However, it does suggest heightened activity at the impacted strike prices. As well, analysts peg RMBL as a unanimous strong buy with an average $10.67 price target. This implies nearly 43% upside potential, making it one of the short-squeeze stocks to consider.
Nine Energy Service (NINE)
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Based in Houston, Texas, Nine Energy Service (NYSE:NINE) is a company that provides onshore completion and production services to the oil and gas industry. And if you think that sounds like a ChatGPT answer, you’re correct. For some reason, Nine Energy appears to want to obfuscate what it does on its word-salad-drenched website. Bears are munching on NINE and I can see why.
At the same time, NINE could be one of the intriguing short-squeeze stocks to gamble on. For one thing, it ranks number 63 on Fintel’s list. It prints a short interest of 14.68% of its float and a short interest ratio of 3.5 days to cover. As with the other ideas in this article, the volatility smile presents an enticing canvas.
To be sure, IV of 4.81 at the $1 strike price is extremely elevated. Basically, it’s possible that traders are hedging against extreme volatility (which would be wise). Still, from the strike price of $5 to $21, IV rises from 0.71 to 3.11. It’s possible, then, that many traders anticipate upside potential. Also, EF Hutton’s Tim Moore pegs NINE a buy with a $7 price target, implying nearly 51% upside.
Wheels Up Experience (UP)
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A provider of on-demand private aviation, Wheels Up Experience (NYSE:UP) on paper seems like an enticing business model for the affluent. However, the company has endured some rocky moments. Earlier this year, Wheels Up’s founder stepped down as CEO as the enterprise reported a wider-than-expected first-quarter loss. Since the start of the year, the ironically named UP dropped down nearly 76%.
It gets worse. Since making its public market debut, shares tumbled more than 97%. Still, for hardened speculators, UP could be an enticing opportunity among short-squeeze stocks. Turning to Fintel, shares are ranked number 20, with a short interest of 15.87% of the float. While that seems awfully risky, UP’s volatility smile offers food for thought.
At the strike price of $2.50, IV comes in at 1.69. However, it rises from here to 2.05 at $5. What’s more, at S7.50, IV stands at 2.68. Again, it’s difficult to make directional guesses. However, options activity is concentrated heavily at prices well above the current market price ($2.56). Also, Jefferies’ Sheila Kahyaoglu rates UP a buy with a $4 price target, implying over 56% upside.
Beam Global (BEEM)
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Based in San Diego, California, Beam Global (NASDAQ:BEEM) is a technology firm focused on clean mobility solutions. Primarily, the company provides charging services for electric vehicles. In addition, it offers energy storage and security solutions. While relevant against the current political and ideological backdrop, BEEM hasn’t quite resonated with investors. Since the January opener, shares tumbled almost 47%.
Nevertheless, for daring participants of short-squeeze stocks, Beam could be a tempting opportunity. Per Fintel, BEEM stock comes in at number 77. It features a short interest of 11.19% of its float against a short interest ratio of 11.53 days to cover. On the surface, BEEM appears destined for further downside. However, its volatility smile may suggest differently.
From the strike price of $7.50, IV rises from 0.66 to 2.79 at $25. Given that BEEM closed at $8.80 on the Sept. 5 session, it appears that options traders anticipate at least the possibility of significant upside. Adding to the sentiment, analysts peg BEEM as a strong buy with a $24 price target, implying nearly 173% growth.
SurgePays (SURG)
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Billed as a technology and telecommunications firm, SurgePays (NASDAQ:SURG) focuses on serving the underbanked community. Given the broader pressures that the COVID-19 pandemic imposed, it’s quite possible that this community can rise in volume. Therefore, SurgePays plays an important role in addressing inequities. However, the market has been slow to appreciate SURG, watching its value drop 25% since the January opener.
Not surprisingly, SURG caught the bears’ attention. At the moment, SURG ranks number 23 on Fintel’s list. Specifically, it prints a short interest of 7.58% of its float against a short interest ratio of 19.25 days to cover. Still, contrarians might be interested in SURG based on its volatility smile.
To be clear, IV spikes to 2.18 at the $2.50 strike price. With SURG closing at $4.97, this activity may indicate hedging against the extreme downside. At the same time, from $5, the IV of 0.76 rises to 1.86 at $10. Therefore, at least some traders may anticipate the possibility of upward movement.
Finally, Maxim Group’s Michael Diana pegs SURG a buy with a $15 price target, implying nearly 202% growth.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
