Trade of the Day: Buy Energy Fuels (UUUU) Stock Call Options


  • Shares of uranium mining specialist Energy Fuels (UUUU) gained nearly 4% on May 6.
  • Congress passed a uranium import ban from Russia.
  • Rising demand and reduced supply points to upside for UUUU stock.
UUUU stock - Trade of the Day: Buy Energy Fuels (UUUU) Stock Call Options

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The bullish narrative for uranium mining specialist Energy Fuels (NYSEMKT:UUUU) comes down to an age-old equation. Rising demand and reduced supply for a hot asset should result in price appreciation. Therefore, UUUU stock presents an intriguing case for long-side speculators.

Based in Lakewood, Colorado, Energy Fuels focuses on the exploration and evaluation of uranium mineral properties in the U.S. That’s significant because of the latest political move. Last week, Congress moved to ban unirradiated low-enriched uranium (that is, uranium that has not been placed in a reactor) from Russia or a Russian entity.

This political action should bolster UUUU stock because of the focus toward domestic uranium production. The U.S. Energy Information Administration disclosed that nuclear power plants in this country import approximately 12% of their uranium from Russia. Again, it’s a classic supply and demand equation that bodes very well for Energy Fuels.

High-Risk Wager That Finally Looks Intriguing

To be clear, those who take a shot on UUUU stock will be taking a major risk.

Since the beginning of the year, Energy Fuels shares have declined almost 17%. In the past one-year period, they suffered a loss of almost 5%. Contrast that to Cameco (NYSE:CCJ), where shareholders enjoyed a nearly 85% lift in the past 52 weeks.

However, because the Russian uranium ban practically forces greater investment in domestic nuclear fuel production, UUUU stock can potentially have its moment in the spotlight.

Trade of the Day: Buy UUUU Stock Call Options

With the fundamentals pointing to the northbound direction, the trade of the day is simple: Buy UUUU stock, specifically its slightly out-the-money (OTM) call options. In particular, I’m intrigued by the 21 June 2024 $6 call.

Chart by Josh Enomoto,

Relative to other call options, the $6 June call features relatively high volume (401 contracts on Monday). Further, the premium is cheap, down at 33 cents when the market closed yesterday. The downside is that the bid-ask spread as represented by the midpoint price is steep at 15.6%. However, keep in mind that because Energy Fuels is a small-capitalization play, high spreads are usually the norm.

Finally, one other factor to consider regarding UUUU stock is the high short interest, which stands at 15.45% of its float. Also, the short ratio clocks in at 19.47 days to cover. That means that based on average trading volume, it will take the bears nearly 20 business days to fully unwind their position.

Here’s the thing. The act of covering a short position requires buying the target security. Panicked bears could spark a positive feedback loop. That could easily send UUUU stock rocketing to the moon.

At the very least, Energy Fuels should be on your watch list.

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 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. Tweet him at @EnomotoMedia.

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