NuScale Power Corporation (SMR), Trending Stock Report

NuScale Power Corporation (SMR) is trending in the news and social media this morning. Mentions are up 900% in the last 24 hours on social channels. The most interesting thing is that AI demand is driving a surge in energy stocks. The extreme demand means the existing grid is almost tapped out, which means AI needs an alternative source of energy, which is why companies like AMZN, MSFT and nearly every other supplier of AI is looking at nuclear.

Now Amazon (AMZN) is investing in projects to develop small modular nuclear reactors (SMRs, hence NuScale’s ticker). This demand for energy has caused SMR to gain 1000% since January. For those who want to jump on the bandwagon, here is what we’re looking at.

Implied Volatility is climbing higher after yesterday’s news that AMZN made another large-scale financial commitment to the industry.

Historical Volatility is also climbing. It should be noted that both implied and historical volatility have been much higher in the past. Just look back to February of this year. The stock went from $4 to $10 and back down to $4. This stock is on the move right now, but history tells us that the move could get even bigger.

This Volatility Term Structure chart for SMR is steeply inverted. Shorter-term implied volatility is much higher than longer-term. This tends to happen when demand for options is very high.

This MDM graph compares the modeled expected distribution for future stock prices (the orange line) with the actual distribution of SMR’s share prices since the beginning of the year (the blue histogram). You can see that the actual stock movement shows that the modeled expectations are not too far off from the stock’s actual behavior. That said, this graph tells us options for the November 15^th expiration are a little expensive.

This Volatility Cone chart for SMR compares implied volatility expectations for each term to the historical volatility for that same term. The blue line shows the average historical volatility; purple lines show each HV measure’s highest high and lowest low over the past year. You can see that the one-month term (which is the term we are interested in) is a little bit high, but nowhere near the extreme historical high. This confirms that options for November 15^th are a bit expensive but still have a lot of room to go big.

This Volatility Skew chart for SMR compares implied volatility expectations for each strike price for the November 15^th expiration. This graph tells us that there is higher demand for higher strike prices. This typically means that there is a huge demand for out-of-the-money (OTM) call options. Because the skew is so steep, where out-of-the-money calls are so much more expensive than at-the-money options, we can craft an options strategy whose moniker is a “call debit spread” to buy those cheap at-the- money (ATM) options and sell those expensive OTM options to reduce our costs.

SMR is trending heavily in the news and on social media. The story is that AI demand is driving demand for energy. This extreme demand has big AI suppliers looking for energy innovation. SMR stock price is rising and options are increasing in demand as a result.

To get the specific details and prices on today’s trade ideas, be sure to read today’s ODDS Online Daily Option Trade Idea.