With cannabis stocks in the news this week, we’ll reveal what the options market is expecting in terms of upcoming stock moves and look at how options can play a role in potential short-squeeze situations.
Using Tilray, Inc. (NASDAQ: TLRY) as an example, we’ll also look at how spreads might be used in a high-premium environment to reduce capital outlay – whatever your trading view.
Overview and Expected Moves
First, a comparison of some of the expected moves over the next month for Tilray, Canopy Growth Corporation (NASDAQ: CGC), Aurora Cannabis Inc. (NYSE: ACB), Aphria Inc. (NASDAQ: APHA) and Cronos Group Inc. (NASDAQ: CRON) via the Options AI Calculator
With Tilray (TLRY) trading about $55, the options market is pricing an expected move for the month of over 60% in either direction. (note – the company is set to report earnings the first week of March). The move being priced in options corresponds to about $90 for a bullish consensus and $20 bearish:
Short Squeezes and Option Strikes
At the time of writing, the highest near-dated option strike is 65. As the stock moves higher, higher strikes will likely be added (in fact, strikes are being added today up to 100), but there is often a lag for short gamma to be re-established. The term “gamma squeeze” has been used frequently in the last …