Canopy Growth Stock Swings After Licensing Update

CGC has found a floor near $44 recently

Managing Editor
Mar 25, 2019 at 10:12 AM
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Canopy Growth Corp (NYSE:CGC) stock was up nearly 1.9% out of the gate, after the cannabis producer received a license from Health Canada to increase cultivation at its facility in New Brunswick. The company hopes to boost production by more than 5,000 kilograms annually, with the first harvest expected within six months. 

Amid stiff broad-market headwinds, though, CGC has since swung down 1.1% to trade at $43.90. In the past two months, Canopy Growth stock has consolidated atop the $44 level, but still boasts a 65% year-to-date lead.

Skepticism has been ramping up toward the weed stock. Short interest rose 6% in the most recent reporting period to 22.56 million shares, more than double its September lows. This accounts for a healthy 11% of CGC's total available float.

Options traders have shown a distinct preference for calls lately. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows speculative players have bought to open 55,472 calls in the last 10 sessions, compared to just 10,060 puts. Given the recent rise in short interest, though, some of this activity could be bearish bettors hedging against any upside risk.

Whatever the reason, the security's short-term contracts look attractively priced at the moment. Specifically, CGC's Schaeffer's Volatility Index (SVI) of 57% is near the bottom of all comparable readings taken in the past 10 months. In other words, near-term options are pricing in relatively low volatility expectations.

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