“WATT is up” with Energous Corp (NASDAQ:WATT)? Volatility is up, that’s for certain. And if you’re bullish on shares of WATT, an Energous long call is priced for the occasion. Let me explain
Energous is a fairly recent and smaller-capitalization IPO. It also happens to be one of the market’s more contentious and volatile battleground stocks. When a company boasts a still-unproven technology — but one that, should it pan out, would be a game changer — that’s bound to happen.
At the heart of the bull and bear debate, Energous’ is developing wireless charging capabilities for mobile devices. The progression towards this end is scheduled to start with the Mini WattUp product, which will aim to revolutionize with a miniscule 3mm ‘contact’ in early 2017.
Energous’ product roadmap for this technology is to have a “real” or full-size transmitter commercially available late next year and deliver a charge distance of up to 15 feet.
But with no product as of yet, more than a few investors aren’t buying into the hype of a science they see as impossible to crack and/or future Apple Inc. (NASDAQ:AAPL) iPhone inclusion. Collectively, investors have been shorting Energous at a fairly aggressive near-19% of WATT stock float according to Yahoo Finance.
Energous Stock Weekly Chart
Looking at the Energous weekly chart, the technical takeaway is that bullish investors are in charge and WATT shares are in position for even higher prices.
No doubt, fairly significant short interest has likely helped fuel WATT’s 52-week gain of nearly 180%. More importantly, the quick reversal of its correction following the iPhone 7 launch (and rather weak speculation of Energous’ technology being in the new product), is telling in our view.
What the price action of the past couple weeks points to is investors, by and large, are still bullish on Energous’ future prospects. At the end of the day, a facetious storyline of iPhone 7 “disappointment” was used to buy WATT shares at a fleeting discount, as the chart reflects.
Where to from here? There’s little in the way of overhead resistance, and should WATT recapture its all-time-highs just north of $20 a share, the expectation would be for a large and quick move up, as some shorts invariably cover and bullish momentum traders involve themselves with a new flavor of the day.
WATT Stock Long Call Strategy
Due to its low float and high short interest, call premiums are trading at a fairly nice discount to underlying volatility in WATT stock, as well as put prices. A long Oct $20 call for 70 cents is one way to take advantage of the current pricing.
There is no free lunch with this long call, but it does allow a trader to position with limited risk and at a decent theoretical discount with WATT volatility near 110% compared to the call’s mid 60%’s implied volatility.
Bottom line, a long call in Energous is a riskier position and could result in a 100% loss in less than a month. Nonetheless, the price benefits are thought to outweigh the risks associated with stock ownership in a company, which while optimistic, could prove more disastrous in short order and longer-term.
Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.
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