Unusual Options Activity: Aurora Cannabis (ACB)

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  • Cannabis stocks surged in the first half of February, but sank in the second half of the month. At least one trader still sees an uptrend in the space, however.

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  • That’s based on the April $15 calls on Aurora Cannabis (ACB). Shares would need to move 27 percent higher for the trade to move in-the-money, suggesting a big move here. Over 6,475 options traded against a prior interest of 405, for a 16-fold rise in volume.

    The trade, expiring in 44 days, cost the trader about $1.04.

    Shares of the cannabis producer are down about 30 percent over the past year. However, shares have surged in recent months, negating much larger losses thanks to a triple since October. The company isn’t currently profitable, and the space is loaded with a large number of producers.

    Nevertheless, the uptrend makes sense as the market works through its overproduction issues, and the rally in prices is likely to continue.

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  • Action to take: The April strike date is aggressive in terms of fighting against the option premium. However, with a total cost of just over $100 per contract, this is an inexpensive bet on the space heading higher in the short-term.

    A surge to the $20 range, a price seen in early February, would leave the option wroth $5 at expiration, well into triple-digit territory! That’s a great trade-off relative to the cost of the option now.