Are Cadiz Inc (CDZI) Shorts Hitting the Bricks?

CDZI surged on a lease agreement, which could spook shorts

by Kirra Fedyszyn

Published on Dec 30, 2015 at 3:28 PM

Cadiz Inc (NASDAQ:CDZI), a California-based developer of land and water resources, soared 25.8% to trade at $5.24, after announcing it had entered into a $12 million, 99-year lease with investment management company Water Asset Management (WAM). The agreement comes as a huge boon for CDZI, which is still down 53.2% in 2015, even after today's surge.

Short sellers may be reeling on the news, as nearly 27% of CDZI's available float is currently sold short. At the stock's average pace of trading, it would take an incredible 47 days to cover all of those bearish positions -- plenty of fuel for an extended short squeeze.

As a result of today's rally, option traders are picking up calls at five times the typical intraday rate, with total option volume at six times the average. In absolute terms, though, CDZI options are still lightly traded, with just 240 contracts exchanged so far.

On the charts, Cadiz Inc (NASDAQ:CDZI) is poised to end the week atop its 20-week moving average for the first time since mid-September, before a Bureau of Land Management (BLM) decision sent the security plunging to two-year lows. The shares have now retraced about 50% of that bear gap.

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