NuScale Power Corp. (SMR) call options volume rose dramatically today after a Craig-Hallum report maintained a Buy on SMR stock. SMR is up over 11% today, and an unusual volume of call options has traded.
SMR is at $51.24 today, up $5.81, or +11.8%. This is a 52-week high for SMR stock.
As a result, a large volume of call options has traded, as seen in today's Barchart Unusual Stock Options Activity Report.
It shows that over 27,000 call options expiring in 9 days on Oct. 24 have traded at the $55.00 strike price, i.e., out-of-the-money (OTM). The midpoint premium is $4.30, indicating that buyers of these calls may believe that SMR could rise to $59.30 by then (i.e., up +15.7% from today).
Other tranches of OTM calls and OTM puts have also traded with less volume, but still high compared to their prior numbers outstanding.
The table above shows that SMR options are very popular today. But, what is the best play here?
Short OTM Calls Have Attractive Yields
The yields here for short sellers are quite attractive. For example, the Oct. 24 covered call yield play (buying SMR and selling OTM calls) now yields over 6.7%%:
$3.55/ 52.92 = 0.6708 = 6.708% for 9 days
The investor who buys 100 shares for $5,292 today can immediately sell that stock in a covered call at the $55.00 strike price for $3.55. The potential total return is:
$5,500 + $355 = $5,855
$5,855 - $5,292 = $563
$563 / $5,292 = 0.106386 = +10.6386% over 9 days
The risk here is that if SMR falls below $52.92 by Oct. 24, the investor may end up with an unrealized loss. But, at least there is a lower breakeven point:
$52.92 - $3.55 income received = $49.37 breakeven
That is -6.7% below today's price, providing some downside protection.
OTM Short-Put Plays
Moreover, the Report today shows that the Dec. 19, 2025, expiry $50 strike price puts have been popular. It's possible that some of the call option buyers are buying these OTM puts to protect their downside.
The only problem is that these puts are more expensive to buy than the near-term calls mentioned above. As a result, as a defensive move, buying these puts while shorting 9-day calls will result in a debit (i.e., a cash outlay) of almost $600:
$3.55-9.53 = $5.98 = -$598 cash cost
However, consider this. The investor who is shorting OTM calls every 9 days may be able to collect $3.55 over the next 65 days. That would result in a +14% net yield per month:
65/9 = 7 x (rounded), so 7 x $3.55 = $24.85
$24.85 call income - $9.53 cost of puts = +$15.32
$15.32 / $52.92 = 28.95% over 2 months, or 14.475% per month
On the other hand, a short-seller of these puts can collect an immediate yield of over 19% for 65 days. That works out to an expected return (ER) of 8.8% per month:
$9.53/$50 strike price put = 19.06% for 65 days
19.06% / (65/30) = 19.06%/2.167 = 8.7955% per mo
Moreover, this allows the investor to potentially buy into SMR at $50.00, with a breakeven point of just $40.47, or 23.5% lower than today's price:
$50.00 - $9.53 = $40.47 breakeven
$40.47 / $52.92 -1 = -23.5% lower
That means the short seller of these puts will not only make a decent yield, but also has the chance to buy in at a potentially much lower price. This is a defensive way to invest in the run-up in SMR stock for value investors.
