Government stake could keep the momentum behind a red-hot, highly-shorted sector
Red Cat Holdings Inc (NASDAQ:RCAT) stock is up 22.4% to trade at 12.97% this morning, after a Wall Street Journal report indicated the Trump administration was in talks to fund U.S. drone companies. Yesterday, H.C. Wainwright initiated coverage on Red Cat with a "buy" rating and $20 price target. Sector peers AeroVironment (AVAV) and Kratos Defense & Security Solutions (KTOS) are up 11.2% and 12.6%, respectively.
This is poised to be RCAT's sixth-straight win, its longest win streak since October. The shares are now up 66% in 2026 and over 116% in the last 12 months, recently clearing overhead pressure at their 80-day moving average.
A short squeeze could keep the wind at the equity's back. Short interest slipped 2.1% in the two most recent reporting periods, yet the 29.08 million shares sold short accounts for 26.7% of the stock's total available float.
Options traders are flying toward calls this morning. In just the first half hour of trading, 32,000 calls have changed hands, volume that's 19 times the average intraday amount and almost 15 times the number of puts traded. The weekly 6/5 11-strike call is the most popular, while the July 15 call is also seeing notable attention among standard expirations.