Penny stock Neptune Wellness Solutions Inc (NASDAQ:NEPT) is near the top of the Nasdaq today, after the nutrition concern inked a three-year extraction deal with cannabis concern Tilray (TLRY). The company's first shipment of biomass is expected in September. At last check, NEPT stock was up 20.2% at $4.77, and options traders are betting on a short-term floor for the shares, with earnings just around the corner.
NEPT is pacing for its highest close since 2012, and its biggest one-day gain since June 2018. The security has now added more than 50% so far in the second quarter, but is facing off against familiar resistance in the $4.80 region. This neighborhood contained the equity's rally attempts in the second half of 2018, and represents double NEPT's late-December lows.
Neptune Wellness is slated to report earnings next Wednesday, June 12. The shares moved lower the day after seven of the last eight earnings reports, however. On average, NEPT moved 6.6% the day after earnings, regardless of direction. This time around, the options market is pricing in more than twice that, with implied volatility data pointing to a 15.7% swing.
As alluded to earlier, Neptune options are flying off the shelves today, in light of the Tilray partnership. So far, roughly 2,700 calls and 1,700 puts have changed hands -- about seven times the average intraday volume.
Most popular is the June 4 put, where it looks like traders are selling the options to open. By doing so, they expect NEPT shares to remain north of $4 through the close on Friday, June 21, when front-month options expire. In this best-case scenario, the traders can pocket the entire premium received at initiation -- and premiums are higher than usual right now, with earnings on the horizon.
Meanwhile, it seems more traditional
option bulls may be buying to open the June 5 call. By doing so, they expect Neptune to extend its rally and topple $5 within the next two weeks.