27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
True Trading Group Partner Jason Spatafora may be better known by his nickname and popular social media accounts @WolfOfWeedST.
However you know him, Spatafora is a leading investor in cannabis. He recently told Benzinga that the entire U.S. cannabis market is of value and worth consideration.
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Focusing on MSOs in his portfolio, he touched on some options worth looking into and the importance of geography and market potential.
Spatafora Likes U.S. Cannabis MSOs
Spatafora believes that the entire U.S. cannabis market is a valuable portfolio addition with the right due diligence. He considers tier-one MSOs the way to go.
"I think all investors, if they can, depending on their brokerage, need to be positioned in tier-one MSOs," he said, adding that a lot is left to happen in the U.S. market, which has the 2016-2018 Canadian market to use as a blueprint.
He noted that the primary difference between the markets was that Canadians had access to ample capital early on. On the other hand, U.S. companies have been limited by regulations from banking to taxation. As such, U.S. companies have not spent as freely.
"The U.S. companies have had to be fiscally responsible in this time period," Spatfora said, commenting that Canadian MSOs "spent like drunken sailors in the market," citing moves into Europe as an example.
He compared two significant players, Canada's Canopy Growth Corp (NASDAQ:CGC) and the U.S.'s Curaleaf Holdings Inc (OTC:CURLF). Spatafora has a position in the latter.
Speaking of Curaleaf, Spatafora said, "It's put up the two biggest numbers the last two quarters ever in cannabis, yet it trades at a multiple of six." He added that the company is "neck and neck with Canopy," noting the Canadian company's $1 billion-plus in write-downs.
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The U.S. total addressable market is a prime factor in Spatafora's confidence as well. He added that the metric is "probably the most important thing to understand."
He noted the size of the U.S. population compared to Canada and the ongoing wave of state-level legalization as signs that the U.S. market should see continued growth.
The country's growth should also be supported by burgeoning markets and states that until recently didn't seem likely to pass cannabis reform laws. Spatfora elaborated, "We're factoring in all of these other states like New York, even places in the South and conservative states."
Spatafora noted other U.S. MSOs he has a position in after meeting his criteria. They include Trulieve Cannabis Corporation (OTC:TCNNF), Cresco Labs Inc. (OTC:CRLBF), Green Thumb Industries Inc. (OTC:GTBIF), AYR WELLNESS INC. (OTC:AYRWF) and Verano Holdings Corp. (OTC:VRNOF).
Tier 3 U.S. MSOs and The Importance of Geography
Without listing any names, Spatafora said that tier-three MSOs could be of value to investors with limited funds looking to "set it and forget it." He said selecting the ideal options in the bunch boils down to geography.
Investment success could depend on the state and its market maturation. Spatafora predicted that brands and smaller operators in earlier market states like Michigan and Illinois could get acquired by more prominent players in time.
That said, the market won't move anytime soon. So, investors need to be prepared for the long haul. "You've got to be okay with the idea of just holding."
Active Management is Key
An investor can buy a cannabis stock and wait several years for a return. However, Spatafora said that the key to actual financial gains is through active management.
He cited an example where an investor holds a core position in cannabis while using 20 to 30% for movement, including selling some options in February and March before returning in the summer.
"The size of your account will grow dramatically," Spatafora concluded.
27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.