Options Traders Bet Canopy Growth Flies High In Months To Come

On Wednesday, Canopy Growth Corporation CGC lost a key support level at $21.72 and on Thursday the stock continued to fall.

There was investor excitement over Senate Majority Leader Chuck Schumer presenting draft legislation aimed at federally decriminalizing cannabis but bullish anticipation was overthrown by the bearish sentiment that plagues the cannabis sector during spring and early summer.

Canopy Growth will print its next earnings report on Aug. 8 and options traders may believe the cannabis giant will finally be able to turn a profit. The company reported its fiscal fourth-quarter earnings on June 1 with a net loss of CA$617 million but said it remained committed to becoming profitable by the end of the 2022 fiscal year.

On Wednesday and Thursday an unusual amount of call contracts were purchased of Canopy Growth, all with an expiry date of Aug. 20, Oct. 15 or Jan. 21, 2022. The options traders, perhaps making a bullish earnings bet, believing federal legalization is on its way or simply taking a position for a seasonally bullish time for cannabis companies, purchased over $974,526 worth of call contracts.

Why It’s Important: When a sweep order occurs, it indicates the trader wanted to get into a position quickly and is anticipating an imminent large move in stock price. A sweeper pays market price for the call or put option instead of placing a bid, which sweeps the order book of multiple exchanges to fill the order immediately.

These types of option orders are usually made by institutions, and retail investors can find watching for sweepers useful because it indicates “smart money” has entered into a position.

Thursday’s Canopy Growth Trades: Below is a look at the notable options alerts, courtesy of Benzinga Pro:

• At 10:59 a.m., a trader executed a call sweep near the ask of 905 Canopy Growth options with a strike price of $22.50 expiring on Aug. 20. The trade represented a $78,735 bullish bet for which the trader paid 87 cents per option contract.
• At 10:59 a.m., a trader executed a call sweep near the ask of 677 Canopy Growth options with a strike price of $22.50 expiring on Aug. 20. The trade represented a $60,253 bullish bet for which the trader paid 89 cents per option contract.
• At 11:00 a.m., a trader executed a call sweep near the ask of 1656 Canopy Growth options with a strike price of $22.50 expiring on Aug. 20. The trade represented a $152,352 bullish bet for which the trader paid 92 cents per option contract.
• At 11:00 a.m., a trader executed a call sweep near the ask of 475 Canopy Growth options with a strike price of $22.50 expiring on Aug. 20. The trade represented a $46,075 bullish bet for which the trader paid 97 cents per option contract.
• At 11:00 a.m., a trader executed a call sweep near the ask of 392 Canopy Growth options with a strike price of $22.50 expiring on Aug. 20. The trade represented a $38,808 bullish bet for which the trader paid 99 cents per option contract.
• At 11:00 a.m., a trader executed a call sweep near the ask of 309 Canopy Growth options with a strike price of $22.50 expiring on Aug. 20. The trade represented a $31,518 bullish bet for which the trader paid $1.02 cents per option contract.

Wednesday’s Canopy Growth Trades: Below is a look at the notable options alerts:

• At 11:13 a.m., a trader executed a call sweep near the ask of 200 Canopy Growth options with a strike price of $30 expiring on Jan 21, 2022. The trade represented a $67,000 bullish bet for which the trader paid $1.45 cents per option contract.
• At 11:35 a.m., a trader executed a call sweep near the ask of 253 Canopy Growth options with a strike price of $20 expiring on Oct. 15. The trade represented a $84,755 bullish bet for which the trader paid $3.35 cents per option contract.
• At 11:36 a.m., a trader executed a call sweep near the ask of 200 Canopy Growth options with a strike price of $20 expiring on Oct. 15. The trade represented a $67,000 bullish bet for which the trader paid $3.35 cents per option contract.
• At 11:36 a.m., a trader executed a call sweep near the ask of 365 Canopy Growth options with a strike price of $20 expiring on Oct. 15. The trade represented a $122,275 bullish bet for which the trader paid $3.35 cents per option contract.
• At 11:35 a.m., a trader executed a call sweep near the ask of 253 Canopy Growth options with a strike price of $20 expiring on Oct. 15. The trade represented a $84,755 bullish bet for which the trader paid $3.35 cents per option contract.
• At 12:50 p.m., a trader executed a call sweep near the ask of 200 Canopy Growth options with a strike price of $20 expiring on Jan 21, 2022. The trade represented a $81,000 bullish bet for which the trader paid $4.05 cents per option contract.
• At 1:26 p.m., a trader executed a call sweep near the ask of 200 Canopy Growth options with a strike price of $22.50 expiring on Jan 21, 2022. The trade represented a $60,000 bullish bet for which the trader paid $3 cents per option contract.

CGC Price Action: Shares of Canopy Growth were trading down 2.1% to $20.22 at publication time.