$CGC bulls roll profits

It took just three sessions for bullish option traders to rack up big gains in Canopy Growth (CGC).

On May 13, Market Rebellion’s Unusual Option Activity Service identified the purchase of 4,500 Weekly $14.50 calls expiring on May 22 for $0.48 to $0.61 with shares at $14.15. This represented fresh buying, as volume was well above the strike’s previous open interest of 319 contracts.

Those calls traded for as much as $1.65 this afternoon, or about 3 times their average purchase price. The stock rose 12.72% in the same time frame, showing how quickly options can far outperform their underlying shares.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

CGC traded higher this session, closing at $15.86 up 14.43% on the day. The Canadian cannabis company rallied along with its peers as sales of cannabis have been on the rise in the “stay-at-home” economy.