Canopy Growth Options Traders Position for Earnings Rally

Canopy Growth will report earnings tomorrow

Feb 13, 2019 at 11:38 AM
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The shares of Canopy Growth Corp (NYSE:CGC) are trading up 2.9% at $45.11 ahead of the Canada-based cannabis company's fiscal third-quarter earnings report, due tomorrow, Feb. 14. CGC stock plunged nearly 11% after the company's last quarterly report last November, but options traders appear to be bracing for a post-earnings breakout this time around.

Over the last 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 38,161 calls on Canopy Growth, compared to 23,531 puts. The February 55 call has seen a significant rise in open interest over this time frame, with nearly 6,300 contracts added, and data confirms buy-to-open activity here.

While it's possible speculative players are using these calls to take a bullish position, it's also likely short sellers are using the options to hedge against any upside risk. Short interest fell 20% during the latest two-week reporting period to 22 million shares, but still represents a solid 44.6% of CGC stock's available float.

After its mid-November post-earnings bear gap, Canopy Growth found its way to a four-month low of $25.26 on Dec. 24. The shares rallied more than 100% off this short-term bottom, briefly climbing above the round $50 level in late January. CGC stock has since consolidated some of these gains -- paring its year-to-date lead to 63.2% -- but appears to have found a foothold near $42, which is a 38.2% Fibonacci retracement of its recent surge.

cgc stock daily chart feb 13


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