It's no secret that artificial intelligence has been one of the hottest (if not the hottest) sectors in the market. Primarily, positive sentiment has surged for "frontline" enterprises, particularly semiconductor firms specializing in high-performance computing chips. Largely overlooked in the enthusiasm is Unity Software Inc ( U ) . Known for its video game software development, it may be time for investors to have a rethink about the company's forward prospects.

While U stock may be a gaming-centric investment, that doesn't necessarily mean that it's not a viable AI play. Quite the opposite, the underlying industry increasingly utilizes machine intelligence to foster greater productivity. Earlier this year, Unity, in its press release, announced enhanced performance and stability for its development platform, along with new AI-powered workflows. In particular, the associated tools should accelerate workflows through automation of complex and repetitive tasks.

What's more, the gaming industry is incredibly receptive to the marriage of software development and machine intelligence. According to Unity's market research, developer optimism about AI is growing, with 96% of developers integrating the innovation into their workflows. Essentially, the technology allows software teams to punch above their weight thanks to the productivity boost.

Even better, Unity could be an underappreciated AI investment for its wide-ranging applications. Notably, Air France-KLM ( AFRAF ) subsidiary KLM utilizes Unity's services to develop a 3D cockpit training program for its pilots. Germany's national railway company, Deutsche Bahn, also incorporates Unity's platform to develop training and operating models. It's more than likely that additional companies will continue to integrate AI into their operations, thus providing a tailwind for U stock.

Statistical Winds Flow Favorably For U Stock

To be fair, while the narrative for U stock appears bullish, it's also a well-known argument — something that's been in the public domain for months. From an investment perspective, these storylines answer the "why" regarding potential interest. However, from a trading perspective, the focus is more centered on "why now?"

It's an important inquiry, particularly for options traders. Since all options expire, the underlying position must not only hit profitability thresholds in terms of magnitude (y-axis); it must also do so within the prescribed time period (x-axis). In other words, while options are attractive for the leverage they provide, they also present the threat of full principal loss (or worse) if the trade goes sour.

As such, traders live in the world of probabilities. Still, it's important to refine this categorization. For most practical applications, two types of probabilities exist: derivative and conditional. Arguably, in the financial realm, investors are more likely to see the former variety, which calculates odds of a certain outcome materializing across the entire dataset's distribution. The latter approach represents a similar calculation but focuses on a specific subset of the data.

To use a baseball analogy, derivative probabilities represent a player's batting average over a full season. Conditional probabilities are equivalent to a player's batting average when there are runners in scoring position (RISP). This is much more situationally relevant for the options trader.

However, in order to apply conditional probabilities, the measurement metric must be consistent across the entire dataset to facilitate the "if-then" implication logic. That's why market breadth sequences — or the sequences of accumulative and distributive sessions — are invaluable for statistical analysis.

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Specific to U stock, in the past two months, the equity printed a "4-6-U" sequence: four up weeks, six down weeks, with a net positive trajectory across the 10-week period. Notably, in 61.54% of cases, the following week's price action results in upside, with a median return of 7.79%.

With Unity stock closing at $23.66 on Friday, it could theoretically be on course to breach $25.50 in short order, perhaps in a week or two. Should the bulls maintain control of the market, historical trends imply a push toward $26 within two or three weeks.

A Tempting Proposition On Tap

For traders intrigued at the statistical setup, they may consider the 24.50/25.50 bull call spread expiring July 11. This transaction involves buying the $24.50 call and simultaneously selling the $25.50 call, for a net debit paid of $43. Should U stock rise through the short strike price ($25.50) at expiration, the maximum reward is $57, a payout of over 132%. Also, the breakeven price at time of writing is $24.93.

Mainly, what makes this trade tempting is the implied shift in sentiment regime. As a baseline, the chance that a long position in Unity stock will be profitable over any given week is 46.77%. However, the 4-6-U sequence — to extend the baseball analogy — creates a favorable matchup. If this were a ballgame, the manager would give the go-ahead for the batter to swing.

Much like baseball's sabermetrics, traders can use conditional probabilities — the batting average with RISP — to make smarter transactions. Of course, this doesn't guarantee success. However, it's a far superior approach to interpreting tealeaves.

The opinions and views expressed in this content are those of the individual author and do not necessarily reflect the views of Benzinga. Benzinga is not responsible for the accuracy or reliability of any information provided herein. This content is for informational purposes only and should not be misconstrued as investment advice or a recommendation to buy or sell any security. Readers are asked not to rely on the opinions or information herein, and encouraged to do their own due diligence before making investing decisions.

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