Options Brief – Week of August 7th
The Canadian marijuana market is preparing for a major development: the legalization of recreational use of cannabis. While some may think that legalization will boost the Canadian economy, others believe that marijuana stocks are simply overhyped.
One of the largest Canadian marijuana stocks company, Canopy Growth Corporation (WEED) is set to become a dominant player in the industry. Options on WEED became available on May 3rd 2017 and the open interest tripled since the beginning of June. Last Friday, WEED ranked five in terms of most active options classes in Canada.
Liberals are on track to legalize recreational marijuana by July 18 of next year, but regulations on distribution remain unclear. As liquidity increases on WEED options, investors may want to take advantage of leverage to trade their directional view. They could buy call options if they feel that WEED will continue to get high or buy put options if they think all potential hope of a new booming industry are likely to go up in smoke.
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