$CGC bulls roll up gains

It took just over a week for bullish option traders to rack up exponential gains in Canopy Growth (CGC).

On May 12, Market Rebellion’s Unusual Option Activity Service identified the purchase of 5,500 Weekly $15 calls expiring tomorrow for $0.56 to $0.82 with shares at $14.78. This represented fresh buying, as volume was well above the strike’s previous open interest of 165 contracts.

Those calls traded for as much as $3.00 this afternoon, or about 4 times their average purchase price. The stock rose 21.85% 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 $18.25 up 7.8% on the day. The Canadian cannabis company rallied along with its peers after a report from the New York Post noted that cannabis could help treat and prevent the coronavirus.