Beyond Meat (BYND) Options Imply a Possible Scalping Opportunity

It’s not something that investors averse to risk should consider. However, plant-based food specialist Beyond Meat (BYND) looks intriguing when you consider the action in the derivatives market. In addition, heavy short interest against BYND stock could send shares surprisingly soaring northward.

Of course, a cursory glance at Beyond Meat’s performance on the charts offers little to no indication of a recovery. At the moment, Wall Street analysts rate BYND stock a consensus Moderate Sell. Usually, market experts prefer to be diplomatic with their criticisms. However, among the 13 voices, six of them issued Strong Sell recommendations. The other seven represented holds.

Another problematic situation is the analyst price target. On average, the per-share forecast calls for $6.28. That implies a loss of 1.7% from the current price of $6.39. To be fair, the most optimistic target calls for $9. Unfortunately, such a lofty view seems unrealistic based on historical trends.

Since the beginning of the year, BYND stock dropped almost 22% of equity value. In the past 52 weeks, it’s down more than 50%. In the past five years, it slipped a stunning 96%. I’ve used the expression before but it’s a Matryoshka doll of pain.

Still, Beyond Meat managed to post “good enough” earnings results during the second quarter recently. The company generated $93.2 million in sales on a loss of $34.5 million (53 cents per share), which was roughly in line with the consensus view. The financial print was also a modest improvement over the year-ago quarter’s results.

Would that be enough to drive BYND stock higher?

Unusual Options Activity Could Lead to Near-Term Upside for BYND Stock

When it comes to the financials for Beyond Meat, it’s difficult to come away with anything other than a negative view of BYND stock. However, if you have the discipline to enter and exit trades quickly, you can probably do a lot worse than speculating on the plant-based meat brand.

Here’s the deal: Last Friday, BYND stock represented one of the highlights in Barchart’s screener for unusual stock options volume. This screener tracks the most aberrant trades in terms of volume dynamics. On Aug. 9, total volume for Beyond options hit 279,090 contracts against an open interest reading of 488,018.

The difference between Friday’s volume and the trailing one-month average metric was 639.61%. Drilling into the details, call volume hit 245,279 contracts versus put volume of 33,811. On paper, this setup seems bullish. However, because every option bought means it was also sold, it pays to understand the true transactional nature of the trade.

That’s where options flow comes into play, which filters exclusively for big block transactions. In this screener, Barchart notes that net trade sentiment stood at $349,100 in favor of the bulls. Overall, premiums of all options with optimistic sentiment clocked in at nearly $1.53 million. Premiums of options with pessimistic sentiment landed at about $-1.18 million.

While there are plenty of folks betting against BYND stock, bullish sentiment continues to pour into Beyond even after the Q2 earnings disclosure. That tells me that the optimism here may be more than just a one-off event.

Further, it appears that most of the bought calls are targeting a strike price range between $7 and $7.50, with many of the options expiring this coming Friday. And at the upper end of the pricing estimate, we’re talking about a 17.4% lift from the Aug. 9 close, which is ambitious.

Still, it may not be impossible.

Short Interest Adds Fuel to the Mix

Another enticing element potentially working in favor of BYND stock is the underlying short interest, which stands at 40.37% of the float. That’s massive as anything above 20% is typically considered extremely high.

Natively, short interest is a negative signal: it simply means that a large portion of the target equity’s float has been borrowed for shorting activities. At the same time, such a trade is extremely dangerous for participants because of the obligation to return the borrowed securities back to the broker.

If BYND stock moves up in value, short traders would have to buy back equity at a higher price than they sold it (to initiate the short position). Therefore, such speculators risk pocketing losses instead of profits on an upcycle. Further, because there is no limit to how high a stock can go, short traders risk incurring unlimited liability.

While I wouldn’t want to invest everything I have in BYND stock simply because of the very real financial weaknesses, it’s not out of the question for shares to pop higher in the near term. At the very least, this is one of the speculative ideas to watch closely.