Every now and then, the options market offers you what could potentially be a badly mispriced derivative contract — and I suspect that Ondas (ONDS) may offer a pleasant surprise for intrepid traders. Now, I have to preface this statement with a massive warning: ONDS stock is not for the faint of heart.
First, you must heed the warning provided by its volatile behavior. According to the Barchart Technical Opinion indicator, ONDS stock rates as a 40% Sell, demonstrating a near-term risk of breaking down. That’s not reassuring since Ondas is about to release its second-quarter earnings report on Aug. 13 before the opening bell.
Can’t Get Enough Options?: Join the list for Barchart’s daily unusual options report, delivered free.
Second, ONDS stock has already enjoyed a robust performance and to many, this dynamic represents a warning that the weak hands could soon be flushed out, especially if the Q2 results don’t hold up. In the trailing month, the ticker has already jumped nearly 34%. Overall, though, the security is down roughly 5% year-to-date, suggesting that the swing higher is only temporary.
However, there are some positives to consider. Recently, the provider of private wireless, drone and automated data solutions reported that one of its subsidiaries received a $50 million order from the U.S. Army, implying demand for the underlying products and services. There’s also news that Blackrock disclosed a new 7.2% passive stake in Ondas stock.
Still, these developments (both good and bad) have likely been baked into the ONDS stock price. What may shift the discussion forward is a rare but compelling quantitative signal.
Severe Order Flow Imbalance May Tilt the Odds for ONDS Stock
I think we all agree that equity market behaviors don’t typically operate in a vacuum. Unlike natural phenomena like the shifting tides of the ocean, you cannot precisely determine a future outcome in the market. And that goes for highly volatile securities like ONDS stock, which commands a 60-month beta of 2.72.
Essentially, when a public ticker makes a significant move, it likely triggers institutional and professional market participants. And that’s a major reason why it’s so difficult (if not impossible) to make absolute, determinative claims regarding future trajectory. What happens to a popular security is not isolated to itself but is watched — and responded to — by traders of all stripes.
However, my hypothesis is that while we can’t make determinative claims, we can make probabilistic claims based on specific, quantitative circumstances that have occurred in the past. By running an inductive analysis, we may infer what the median outcome might be given the specific circumstance.
For Ondas stock, what I noticed was that — despite the big recent moves — it has only printed two net positive weekly candlesticks over the last 10-week period, thereby leading to a downward slope. Typically, what happens under this 2-8-D quantitative sequence is a strong move higher, much higher than what would be expected under random conditions.
You can see evidence of this phenomenon yourself. If you look at Barchart’s weekly interactive technical chart, you’ll notice that between late February and early May 2025, ONDS stock printed a 2-8-D sequence. What happened next was a massive move higher to around the current $9 to $10 level.
I’m not suggesting that we’ll see a repeat performance. However, if we were to use some basic statistical calculations, we would anticipate ONDS stock reaching a median endpoint outcome of around $10.50 at the end of week 3 (Aug. 28). Of course, if the Q2 earnings report is enthusiastically received, that would add fuel to this speculation.
A Potentially Mispriced Options Spread
For those who want to take a quick stab at scalping near-term profits, the 9.50/10.00 bull call spread expiring Aug. 28 may be an enticing idea. This trade requires a net debit of $22 in the hopes of attaining a $28 maximum profit should Ondas stock rise through the $10 strike at expiration.
Why is this idea so tempting? First, according to the inductive model above, the median outcome of ONDS stock under 2-8-D conditions would be around $10.50 at expiration. That would be more than enough to trigger the second-leg strike. Second, assuming the model is corrective, this bull spread features positive expected value (EV).
From model-derived data, of the 31 times that the aforementioned signal has flashed since January 2019, ONDS stock has risen above the equivalent of the $10 price a total of 16 times at the end of week 3 (Aug. 28). So, the probability of full profitability may be 51.6%, again assuming the model is an accurate representation of tomorrow’s truth.
If so, we just need to run some basic math; that is, 51.6% of the time, the above bull spread will pay out $14.45 (0.516 x $28 max profit), while the remaining 48.4% of the time, the spread will lose $10.65 (0.484 x $22 max loss). Over the theoretical long run, assuming you keep trading this exact situation, you’re looking at winning a net $3.80.
Please note, though, that we’re still dealing with probabilities, not certainties. I’m trying to narrow the risk down by combining an inductive model with positive EV. This move doesn’t eliminate all risk but it does provide a rational framework of dealing with uncertainty.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
More news from Barchart
Tesla Stock Surged 40% From Here Last Year. Here's How to Play TSLA Stock in 2026. Ondas (ONDS) Stock Presents a Bold Opportunity for Aggressive Options Traders Domino's Pizza Stock Looks Cheap - Short Put Plays Work Here Billionaire Michael Saylor Says Skip College and 'Spend $20 a Month on an AI Subscription,' Warns Not to ‘Learn How to Do Things That AI Can Do'