Unusual Options Activity: Unity Software (U)

3D Software

3D software company
Unity Software (U) has moved higher in the past few weeks, on AI speculation. One trader is betting the rally will continue.

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    • That’s based on the July $51 calls. With 21 days until expiration, 12,096 contracts traded compared to a prior open interest of 186, for a 65-fold rise in volume on the trade. The buyer of the calls paid $0.95 to make the bullish bet.

    Unity shares recently went for about $44. Shares would need to rise $7, or another 16 percent, for the option to move in-the-money. Unity does have an intra-day 52-week high of $58.63, so such a move is possible.

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    Operationally, Unity is like several other software companies delving into AI right now.

    Unity isn’t profitable yet, and estimates are that the stock trades at nearly 100 times forward earnings. Revenues surged 56 percent over the past year, and may move higher on the company’s AI initiatives.
    Action to take: Shares are still under $20 billion, making it a smaller player in the tech space.

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    • If their AI plans come to fruition, they could be worth far more, and even get bought out by a bigger player. That makes for an interesting speculation now.

    For traders, the July calls are an inexpensive way to speculate on AI stocks moving higher in the coming weeks. They could potentially double, or lose all their value. Chances are traders who buy now and take quick profits will earn mid-double-digit gains.

     
    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.