$CGC calls soar 9-fold in days

It took less than three sessions for bullish option traders to rack up huge gains in Canopy Growth.

On April 16, Investitute’s market scanners identified the purchase of 2,000 18April $44.50 for $0.24 to $0.46 with shares at $42.87. This was clearly fresh buying, as volume was more that double the strike’s existing open interest of 819 contracts.

Those calls traded for as much as $3.20 today, more than 9 times their average purchase price. The stock rose 11.08% 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 was up 3.99% to $44.56 today. The Canadian cannabis company rallied on news this morning that it is making a bid to buy New York marijuana producer Acreage Holdings for an estimated $3.4 billion.