Options Traders Blast Booming Weed Stocks

APHA and CRON are brushing off a scathing Citron tweet

by Karee Venema

Published on Feb 1, 2019 at 2:30 PM

The stock market is mixed today as traders digest a strong jobs report against a negative earnings reaction for Amazon. Among individual names making notable moves are weed stocks Aphria Inc (NYSE:APHA) and Cronos Group Inc (NASDAQ:CRON), as well as pizza maker Papa John's Int'l, Inc. (NASDAQ:PZZA). Here's a quick look at what's moving the shares of APHA, CRON, and PZZA.

Aphria Bulls Bet On Bigger Gains

The U.S.-listed shares of Aphria were last seen up 14.4% to trade at $10, after the company said it introduced its first cannabis strains to be produced in Europe to Denmark's Schroll Medical. This and yesterday's report from Bloomberg that Green Growth is open to adjusting its buyout bid is offsetting a Citron Research tweet in which the short seller said it's "Taking profits on $APHA."

APHA stock is now set for its highest close since Nov. 16, and options traders are targeting more upside. Almost 20,000 calls have changed hands so far today -- topping the record high 18,636 calls traded in a single session from Jan. 11 -- nearly five times the number of puts on the tape. Traders may be buying to open February 10 calls for a volume-weighted average price (VWAP) of $0.54, making breakeven for the call buyers $10.54 (strike plus premium paid).

Cronos Stock Hit a Record High Earlier

Citron also chimed in on Cronos Group, tweeting, "Canadian Weed has run too far moving [into] US names. $CRON short with stock trading 70% above analyst tgt." Nevertheless, CRON shares are up 7.2% at $21.10, fresh off a record high of $21.79. The equity has more than doubled already this year.

Options volume is off the rails today, too. Around 70,000 puts and 68,000 calls have been exchanged already, five times the average intraday pace. Day traders are initiating new positions at the weekly 2/1 20- and 21-strike puts, where more than 14,000 contracts have traded, while longer-term speculators appear to be purchasing new positions at the March 20 puts. If this is the case, they expect CRON to sink back below $20 over the next two months.

Buyout Buzz Fuels Heavy Papa John's Options Activity

Papa John's stock is down 8.4% at $38.74, after the pizza chain said it is no longer putting itself up for sale -- with the buyout buzz initially surfacing last year. Instead, the company is considering selling a stake in order to boost finances. PZZA is now off 36% from an unsuccessful test of the round $60 mark in mid-November, though the $38.50 region is resurfacing as familiar support.

Options are running hot, with 7,802 puts and 3,585 calls on the tape -- 10 times what's typically seen at this point in the day. The February 40 put is most active, where it looks like one trader may be liquidating their in-the-money position. Elsewhere, traders may be buying to open the February 38 put for a VWAP of $0.99, which would make breakeven for the put buyers $37.01 (strike less premium paid).

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