Coke's Pot Prospects Push Tilray Stock Higher

However, some TLRY options traders are calling a short-term top

Sep 17, 2018 at 1:23 PM
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Coca-Cola Co (KO) said it is "closely watching" the cannabis drinks industry, which is "evolving quickly" -- especially with Canada set to legalize recreational marijuana on Oct. 17. Against this backdrop, and with Constellation Brands' (STZ) recent investment in Canopy Growth (CGC) still fresh on investors' minds, the shares of fellow Canadian weed stock Tilray Inc (NASDAQ:TLRY) are higher today -- and options volume is popping.

Tilray stock was last seen 10.3% higher to trade at $120.30 -- set for its highest close ever. The shares began trading in mid-July, with an initial public offering (IPO) price of just $17, but have exploded in that time frame, amid skyrocketing hopes for the medical marijuana industry. The shares touched a record high of $127.27 just last week, before taking a breather on Friday, and have soared more than 290% in the past month.

TLRY stock chart sept 17

So far today, roughly 35,000 calls and 23,000 Tilray puts have changed hands -- about 1.8 times the average intraday pace. It looks like some speculators are calling a short-term top for TLRY shares, selling to open the September 145 call -- one of the most active options on the day. By writing the calls to open, the sellers expect the stock to remain south of $145 through the close on Friday, Sept. 21, when the options expire. In this event, the calls will expire worthless, allowing the traders to retain the entire net credit received at initiation.

Today's appetite for short calls runs counter to the growing trend seen on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). During the past two weeks, TLRY speculators have bought to open 1.62 calls for every put, per the exchanges. The October 90 call -- which expires two days after Canada legalizes weed -- has been most popular, with more than 5,600 contracts added in this time frame. This in-the-money strike is now home to peak open interest among all series, with more than 5,600 contracts outstanding.

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