Calls green overnight in $CGC

Option traders harvested huge profits in Canopy Growth today, just one session after opening bullish positions in the name.

Just yesterday, Investitute’s market scanners found that 2,000 Weekly $50 calls expiring this Friday were purchased for $1.05 to $1.80 with shares at $47.86. This was clearly fresh buying, as open interest in the strike was only 439 contracts before the activity appeared.

Those calls traded up to $6.50 this morning, 6 times their initial purchase price. The stock rose 16.67% at the same time, showing how quickly options can far outperform their underlying shares.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

CGC gained more than 14% yesterday and reached a lifetime high of $56.60 this morning before pulling back to close at $52, off 0.76% on the session. Cowen raised its price target on the cannabis company, which received a $4 billion investment from Constellation Brands last month, to $56.13 from $42.48 yesterday.