Shares of cannabis producer Tilray Brands (TLRY) are down 72 percent in the past year as investors have lost interest in the growing cannabis market. One trader sees the potential for a strong bounce in the months ahead.
That’s based on the November $7.00 calls. With 86 days until expiration, 7,536 contracts traded compared to a prior open interest of 121, for a 62-fold rise in volume on the trade. The buyer of the calls paid $0.24.
Shares recently traded around $3.50, so in order for the option to move in-the-money, shares would have to double. The stock has a 52-week high over $14.
Even with a big drop in share price last year, the company grew revenues by 8 percent. However, the company is still in its early stages and remains unprofitable.
Action to take: Even with the big drop, Tilray is one of the largest players in the cannabis space. Investors interested for the long haul may like picking up some shares here.
For traders, there’s enough daily volatility in shares that these inexpensively-priced options could lead to a quick high-double-digit return or better in the coming weeks.
As with any trade right now, it may make sense to scale in, using down days to acquire more option contracts. And use a one-day jump in shares to take some profits.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.