Pot Frenzy Has Options Traders Piling In

(Bloomberg) -- As the cannabis craze on Wall Street sends pot stocks on a wild ride, options investors are moving in fast, laying on bets that suggest gains in some of the biggest companies may at least temporarily fade.

Pot Frenzy Has Options Traders Piling In

Tilray was down 19 percent in afternoon trading Thursday, erasing almost half the gain it posted in a roller-coaster session a day earlier. Total put option open interest increased 24 percent during Wednesday’s session, while open interest in the calls only increased by 7 percent. Taken at face value, that could imply growing bearish sentiment.

Pot Frenzy Has Options Traders Piling In

Conversely, the ETFMG Alternative Harvest ETF, a $710 million exchange-traded fund tracking marijuana stocks, was up 3.7 percent, adding to Wednesday’s 3.9 percent gain. Tilray shares make up 14 percent of the fund’s assets. During yesterday’s run-up, call open interest in the fund surged by 27 percent, while the total number of outstanding puts increased by 12 percent.

While put open interest remains significantly higher than call open interest across both securities, one thing is for sure, interest in options is building.

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