Tilray Eyes Expansion Into U.S. Weed Market with New Deal

Cannabis name Tilray Inc (NASDAQ:TLRY) is making headlines this morning, after it announced a deal to purchase $165.8 million in convertible debt from U.S. rival MedMen Enterprises. The agreement could boost Tilray if U.S. regulations change, as Canada-based companies are not yet allowed to own U.S. weed businesses. At last check, TLRY is up 1.3% at $13.29.

The marijuana stock has been trending lower on the charts since surging to a Feb. 10, two-year high of $67. Overhead pressure at the 30-day moving average has kept a tight lid on shares since early July, though the stock seems to have found a floor at the $12 mark in recent weeks. Longer term, TLRY still boasts an impressive 91.5% year-over-year lead.

Analysts are cautious towards the equity. Of the 15 in question, 11 carry a tepid "hold" rating, while only four say "strong buy," indicating there is still room for upgrades going forward. Meanwhile, the 12-month consensus target price of $17.45 is a 31.7% premium to current levels.

Short sellers have been piling on Tilray stock, on the other hand, leaving it ripe for a short squeeze. Short interest rose 29.1% over the last two reporting periods, and the 36.90 million shares sold short make up a significant 8.6% of the security's available float.

The options pits are far more optimistic, with calls popular. This is per Tilray stock's Schaeffer's put/call volume ratio (SOIR), which sits higher than only 10% of readings in its annual range. This indicates short-term traders have rarely been more call-biased.

This penchant for calls is reflected in today's trading. So far, 44,000 calls have crossed the tape, which is double what is typically seen at this point. Most popular is the August 14 call, followed by the 13.50 call in the same series, with positions being opened at both.

Now seems like a great time to weigh in on the stock's next move with options, too, thanks to affordably priced premiums. This is per TLRY's Schaeffer’s Volatility Index (SVI) of 77%, which sits higher than just 3% of readings from the past 12 months. Plus, its Schaeffer's Volatility Scorecard (SVS) stands at 84 out of 100, indicating the equity has exceeded options traders' volatility expectations over the past year -- a boon for buyers.