Options Bulls Are Lighting Up These Weed Stocks

CGC, CRON, and TLRY stocks have been on fire in recent weeks

Patrick Martin
Aug 24, 2018 at 3:08 PM
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Stocks are confidently higher today, with indexes touching all-time highs after remarks from Fed Chair Jerome Powell and a Netflix (NFLX) upgrade. Looking at individual names, weed stocks Canopy Growth Corp (NYSE:CGC), Cronos Group Inc (NASDAQ:CRON), and Tilray Inc (NASDAQ:TLRY) are all higher -- and attracting notable options trades -- after Bloomberg reported that beverage giant Diageo (DEO) is exploring a deal with three Canadian cannabis producers to develop a marijuana-infused drink. Here's a closer look at what's moving shares of CRON, CGC, and TLRY.

CGC Stock Scaling NYSE, Options Volume Hot

Canopy Growth stock is up 9.6% to trade at $45.40, and earlier touched a fresh record high of $45.92. The potential Diageo deal has CGC near the top of the New York Stock Exchange (NYSE) today. In fact, pot stocks have been on a tear lately, celebrating Constellation Brands' (STZ) big investment in Canopy Growth, as well as several supply deals with Ontario ahead of Canada's legalization of pot on Oct. 17. The equity has nabbed a fresh record high every day this week, and now boasts a weekly gain of 34.3%, its best since November 2016. 

Shorts could be heading for the exits soon amidst this latest upswing. Short interest increased by 6.2% in the most recent reporting period, and the 18.32 million shares sold short represents 10.5% of CGC's total available float, and more than six days of pent up buying power.

Call activity has been rampant today. Over 36,000 calls have exchanged hands today, four times the intraday average and volume pacing for the 99th percentile of its annual range. Most popular today is the October 30 call, where a majority of the activity is of the buy-to-open activity kind, indicating options traders are anticipating a rally north of $30 by the time the options expire on Oct. 19 -- two days before marijuana becomes legal in Canada.

CRON Rise Sparks Bullish Options Trades

In response to the Bloomberg report, Cronos Group stock is up 16.2% to trade at $9.92, one of the best stocks on the Nasdaq today. CRON is on track for its best day since Feb. 28 -- a day after CRON started trading on the Nasdaq -- and is within a chip-shot off its March highs. Just this week, CRON has rocketed more than 51%, set for its best week of 2018.

In the options pits today, calls are hot. CRON calls are trading at 10 times what's typically seen at this point in the day, with more than 36,000 contracts exchanged, and volume already at an annual high. Leading the charge is the September 10 call, where it appears new positions are being purchased. In doing so, the buyers expect CRON to rally past $10 by the time the options expire on Sept. 21.

TLRY Red-Hot as Earnings Approach

Tilray stock is up 13.2% to trade at $43.30, and earlier scored a record high of $44.37. This brings TLRY's 2018 total to 70%, and the shares have more than doubled their July 18 initial public offering (IPO) price of $17. This week alone, the security has soared more than 41%.

Tilray -- a favorite weed stock of Citron Research -- will report its first ever earnings as a public company after the close next Tuesday, Aug. 28, and options traders are pricing in a 16.7% post-earnings move, regardless of direction, for the equity the day after earnings.

In Tilray's options pits today, over 3,800 calls have exchanged hands -- five times the intraday average and a new record high. Most active is the September 40 call, with new positions being opened. "Vanilla" buyers of the call expect TLRY to extend its trek north of $40 through the close on Friday, Sept. 21, when the options expire.


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