Trade Plan: $CGC
Trade: -15 CGC 8/6 16.5p for a $0.30 credit
Category: Earnings (HT Wheel)
Minimum Collateral to Enter: $671
Max profit: $450 | RoR: 1.85% | Collateral: $10,069 | RoC: 4.47% | Cushion: 17.68%
I was itching for an earnings trade and this is what I've settled on. CGC has a massive implied move of $2.90 which would put the lower end of the range for the expected move at 16.79. Breakeven price is 16.20, which is shown by the red line on the 180d chart below:
As you can probably tell, it hasn't traded below our breakeven price in the past 180 days. To actually find where we could expect some sort of support, we have to take a look at the 1 year chart, as seen here:
So between August and September of last year, we saw some choppiness in this $16-18 range which we could assume would act as the next level of support should it break below $18, the current support level.
What I love about this trade is the fact that they report tomorrow morning and the options expire in the afternoon. So for us to lose any money here it's going to take a big move fast. If it does move against us then the plan is to either manually assign ourselves or roll our position into next week, which should be very attainable as we can expect the extrinsic value to be pretty much gone by tomorrow afternoon.
And that takes me to the final point, which is rule #1 when selling options: Don't sell anything you wouldn't want to own. This is a weed stock (bro) and I like the longer-term outlook of that sector. As you can see from the charts above this is a great entry and these are typically pretty volatile. Would be perfectly happy to take assignment and run through the HT wheel with this one.
There's also a 50/50 shot this thing goes up, you'll make easy money, and you won't even need to worry about most of what I just wrote. We're hoping for that outcome.