CBD Stock Attracts Option Bulls With Walmart Deal

NBEV bulls are picking up weekly call options

Apr 8, 2019 at 1:16 PM
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The shares of CBD-infused drink maker New Age Beverages Corp (NASDAQ:NBEV) are in rally mode today, after the company inked its first national distribution agreement. Specifically, New Age's Marley Mate brand of drinks will soon hit Walmart (WMT) shelves. Against this backdrop, NBEV stock is up 18.7% at $5.67, and options traders are swarming.

NBEV shares are set to close atop their 20-day moving average for the first time since early February, when the stock was putting in 2019 closing highs. What's more, NBEV is pacing for its biggest single-session jump since November. Prior to today, the equity was trading at year-to-date lows, ending Friday's session at $4.78.

NBEV stock chart april 8

In early afternoon trading, New Age Beverages has seen roughly 30,000 calls and 11,000 puts cross the tape -- seven times the average intraday volume, and pacing for the 99th percentile of its annual range. Most popular are the weekly 4/12 5.50- and 6-strike calls, with buyers expecting NBEV to extend its upside momentum above the strikes through the close on Friday, when the options expire.

Today's appetite for short-term calls is more of the same for NBEV. The equity's Schaeffer's put/call open interest ratio (SOIR) stands at 0.51, indicating that call open interest nearly doubles put open interest among options expiring within three months. In other words, it seems near-term speculators were already bullish toward the drink maker even before today's big Walmart announcement.

However, some of the recent call buying -- particularly at out-of-the-money strikes -- could be attributable to short sellers seeking options insurance. Short interest represents 55% of NBEV's total available float, and would take about a week to buy back, at the security's average pace of trading. That's plenty of fuel for a short squeeze to drive additional gains.


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