The shares of Pyxus International Inc (NYSE:PYX) are surging today, after Citron Research said it would not short the weed stock. In a tweet, the noted short seller said, “The stock could double from here as long as investors are Cannabis crazy.” This is a far cry from Citron’s take on Cronos Group (CRON), and has PYX stock up 32.2% at $37.26 — fresh off a five-year high of $38.48.
Just last week, Pyxus shares gained 22.5%, after Canada gave the North Carolina-based firm access to grow medical marijuana. With today’s pop, the equity is up more than 182% year-to-date, and options traders think there’s even more upside to come.
At last check, 5,680 calls and 2,418 puts have changed hands on PYX, almost eight times the average intraday amount and a new 52-week peak. Most active is the October 35 call, where it looks like new positions are being purchased for a volume-weighted average price of $5.55. If this is the case, breakeven for the call buyer at the close next Friday, Oct. 19 — two days after weed becomes legal in Canada — is $40.55 (strike plus premium paid).
Meanwhile, these short-term PYX options are pricing in elevated volatility expectations at the moment. According the Trade-Alert, the at-the-money implied volatility term structure on monthly October options is 208.46%, compared to 137.72% for the further-dated February contracts.
Credit: www.schaeffersresearch.com
