At the most elemental core, investing in the equities space centers on information asymmetry. Essentially, the market is a battlefield of unequal information. Frankly, those with better data, faster interpretation or more probabilistically sound models exploit participants that lack these attributes.

Everything else — valuations, technical profiles, headline-generating narratives — represents noise layered on top of this fundamental truth. In other words, if all market participants had access to the same information and processed the data in the exact same way, there would simply be no trade.

As such, every trade is a disagreement. One side may believe an asset is worth more, the other less. Further, alpha comes from exploiting the distortions that may materialize, either because of a lack of interpretation or an inability to respond quick enough.

Subsequently, investors are always looking for an edge — and some of that may be provided by unusual options activity. Primarily, by analyzing heightened trends in the derivatives space, the moves in question potentially reveal information asymmetry. Large or unusual trades could be signaling that someone knows or suspects something. Thus, by monitoring the development, you could be detecting unpriced risk or event anticipation.

Moreover, unusual options activity implies elevated volatility expectations. Typically, aberrant trades precede volatility expansion. After all, traders aren’t buying options merely as a leisurely exercise; instead, they’re pricing in forward movement. And while this kinesis may not show in implied volatility charts yet, astute traders may want to position themselves before the price rebalancing begins.

To be clear, not all unusual options activity lead to surges — some trades can be duds. That’s why it’s also important to frame the options activity under a probabilistic lens. Below are three stocks that are catching the eyes of sophisticated traders and which also offer empirically elevated odds.

Freshpet (FRPT)
One of the names that triggered the strongest responses in terms of unusual options activity, Freshpet (NASDAQ:FRPT) saw total options volume hit 5,047 contracts, representing a 303.12% lift over the trailing one-month average metric. Further, call volume stood at 3,023 contracts against put volume of 2,024 contracts, resulting in a put/call ratio of 0.67.

Initially, FRPT stock traded lower following the company’s first-quarter earnings results. On the bottom line, the company’s loss of 26 cents per share missed expectations. Additionally, the leadership team lowered its fiscal year 2025 sales outlook due to macroeconomic challenges. Nevertheless, by Monday’s close, FRPT moved up to $79.09, representing a lift of 3.58%.

It’s possible that there could be more fuel left in the tank. In the past 10 weeks, FRPT stock printed a “3-7” sequence: three weeks of upside interspersed with seven weeks of downside, with a negative trajectory across the period. This empirical, falsifiable pattern has materialized 43 times over the trailing decade. Not only that, in the subsequent week, long-side odds stand at 62.79%.

As a baseline, the chances that a long position held for a one-week period will be profitable is only 54.38%. Therefore, the probabilities at this moment favor bullish speculation.

Zillow (Z, ZG)

Easily one of the biggest names attracting unusual options activity this week is Zillow (NASDAQ:Z, NASDAQ:ZG). As a real-estate marketplace with a focus on technology, Zillow has been a blisteringly hot name during the COVID-19 crisis. However, as economic realities began to take shape, Z stock cratered. Still, steam has been steadily brewing, with the company scheduled to release its Q1 earnings results on Wednesday after the close.

Subsequently, it’s easy to understand why Z stock has attracted unusual options activity. On Monday, total volume in the derivatives space reached 9,328 contracts, representing a 47.41% lift over the trailing one-month average period. Moreover, call volume at 7,337 contracts greatly outpaced put volume of 1,911 contracts, resulting in a put/call ratio of 0.27.

What makes Z stock truly stand out, though, is its statistical setup. In the past 10 weeks, Zillow printed a 3-7 sequence: again, that’s three weeks of upside mixed with seven weeks of downside, with an overall net negative trajectory across the period. This pattern has flashed 43 times in the past, with 65.12% of occurrences resulting in upside in the following week.

As a baseline, the chances of a long position rising over a one-week period is only 50.15%. Therefore, Zillow appears to be a strong candidate for speculation.

Marten Transport (MRTN)
Probably the riskiest name on this list of unusual options activity, Marten Transport (NASDAQ:MRTN) has struggled for traction. Although a logistics leader in the field of international transportation, current economic challenges have weighed heavily on the business. Since the start of the year, MRTN stock lost almost 17% of equity value. Over the past 52 weeks, the security is down 26%.

Following Monday’s ringing of the closing bell, total options volume for MRTN stock reached 3,968 contracts, representing a 541.03% lift over the trailing one-month average metric. Interestingly, all of the volume was concentrated on puts, no calls. This implies, though hardly guarantees, a net negative sentiment toward Marten.

What’s intriguing about the logistics specialist, though, is the 3-7 sequence with net negative trajectory. In the trailing decade, the 3-7 has appeared 32 times. In 75% of cases, MRTN stock moved higher in the following week. Further, the risk-reward profile is asymmetrically favorable to the bulls, with a median return of 3.03% under the positive pathway (versus a loss of 2.48% under the negative pathway).

As a baseline, the chances of MRTN stock moving higher over a one-week period is only 48.64%. Therefore, the deck is statistically hot, even though it might not look like it on paper.

— Josh Enomoto

Former Wall Street Insider Calls This His Biggest Gold Play Yet [sponsor]
Karim Rahemtulla, the trader behind a 400% gain in 24-months on Rolls-Royce, has uncovered another potential multi-bagger. This under-$20 stock gives you exposure to over 1-oz of gold with the lowest production costs in the industry. And an upcoming announcement could send this stock soaring. Get Karim's urgent briefin - click here now.

Source: Money Morning