Pot Stock Hits Record Highs, Options Traders Respond

The equity is up over 232% in 2021 already

Deputy Editor
Feb 9, 2021 at 12:52 PM
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The shares of cannabis stock Aphria Inc (NASDAQ:APHA) are surging this afternoon, getting a nice little halo lift from pending merger partner Tilray (TLRY), after the latter nailed down a deal with Grow Pharma to import and distribute its medical cannabis products into the United Kingdom. As a result, APHA is up 24.8% and earlier tapped a new all-time high of $23.68. The equity is eyeing its sixth consecutive close above its 10-day moving average, trendline that besides two days has been a consistent layer of support for much of 2021. APHA is now up 230% already in 2021, and options traders are coming out of the woodwork.

APHA Chart February 9

So far today, over 93,000 calls and 13,000 puts have crossed the tape -- four times the average intraday volume and pacing in the 100th percentile of its annual range. Most popular is the weekly 2/12 25-strike call, followed by the February 25 call, with positions being opened at both. This suggests these traders are speculating on a lot more upside for APHA by the time these contracts expire. 

Though calls are handily outpacing puts on an overall basis, the options pits have been a bit more pessimistic of late. In fact, Aphria stock's 10-day put/call volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), stands higher than 77% of readings from the past year.

Pessimism could also be unwound from short sellers and analysts alike. A healthy 6.7% of APHA's total available float is sold short, and the consensus 12-month price target of $6.48 is a massive 72.7% discount to current levels. 

The good news for options traders is that APHA's Schaeffer's Volatility Scorecard (SVS) stands at 83 out of 100, meaning the stock has tended to exceed options traders' volatility expectations during the past year.


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