Option Bull Sees Big Friday Finish for This Weed Stock

ACB is trading near key technical levels

May 21, 2019 at 1:52 PM
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Call volume is running hot on Aurora Cannabis Inc (NYSE:ACB) this afternoon, as the weed stock trades up 2.2% at $8.68 -- aiming for its first win in three sessions. At last check, nearly 29,000 ACB call options were on the tape, 1.5 times what's typically seen at this point and 11 times the number of puts traded.

Most active by a mile is the weekly 5/24 9-strike call, where over 18,000 contracts have been exchanged. Nearly half of this volume occurred with a 9,084-contract block was likely bought to open for 10 cents apiece, creating an initial cash outlay of $90,840 (number of contracts * premium paid * 100 shares per contract).

This represents the most the call buyer stands to lose, should ACB settle south of the strike at the close this Friday, May 24, when the weekly options expire. Profit, meanwhile, is theoretically unlimited on a move above breakeven at $9.10 (strike plus premium paid).

Today's call-skewed trading just echoes the recent trend seen in ACB's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculative players have bough to open 58,209 calls in the past 10 days, compared to 13,784 puts.

Plus, ACB's Schaeffer's put/call open interest ratio (SOIR) is docked at 0.46, meaning calls more than double puts among options set to expire in three months or less. The June 10 call, in particular, is home to 38,889 contracts, and data from the major options exchanges confirms significant buy-to-open activity here.

Similar to the broader equities market, Aurora Cannabis stock has been trending higher since its late-December lows, and topped out at a six-month high of $10.31 on March 19. While the shares pulled back after hitting these highs, they bounced near $8.11 -- a 38.2% Fibonacci retracement of the equity's December-March surge, as well as its rising 80-day moving average. However, ACB is now staring up at its 50-day trendline, which emerged as a ceiling during last week's breakout attempt.

acb stock daily price chart on may 21


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