It has been a feeding frenzy in the Sundial option pits for the past few weeks
Go ahead and add marijuana names Sundial Growers Inc (NASAQ: SNDL) on the list of “meme stocks” going wild this week. The stock is up 14.9% today to $ 1.30, up a whopping 55% from the previous week. Sundial has all the trappings of a stock prepped for a Reddit-powered rally. It’s currently firmly anchored in penny stock territory – much like GameStop (GME), which was near the $ 2 mark a little over a year ago – and is selling heavily short. In fact, short rates currently account for an exorbitant 309.5% of the stock’s available float.
To add even more traction to equity, a halo lift is from the pot sector. A massive merger between Tilray (TLRY) and Aphria (APHA) and comments from Amazon (AMZN) supporting the state legalized sale of cannabis shed a positive light on the suppressed cannabis sector. But of course there is a lot of volatility associated with speculative trading. SNDL is one of the best performing stocks on the Nasdaq today and appears to have found some support for this volatility through its 180-day moving average, but has a way to go if it is looking to overtake its brief spike in levels from $ 4, which the stock hit in mid-February.
Regardless of Sundial stock’s next move, it was a bit of a feast in the stock’s option pits. The stock just popped up on Schaeffer’s senior quantitative analyst Rocky White’s list of stocks that have rallied the most option volume over the past 10 days, with names highlighted in yellow on the list. According to White, 805,802 calls and 70,555 puts were exchanged. The two most popular contracts during this period were the 6/4 1-strike call and the 5/28 1-strike call.
This is causing an extreme upward move among options traders as measured by the security’s 10-day call / put volume ratio of 14.2 on the International Securities Exchange (ISE), the Cboe Options Exchange (CBOE) and the NASDAQ OMX PHLX (PHLX) . This bullish behavior continues in today’s trading, with 2.71 million calls traded to date – double the intraday average – compared to just 205,000 puts.
The mood among the brokers was not so sunny. Of the six that cover SNDL, three say “hold” and three say “strong sell”. In addition, the 12-month consensus price target of 76 cents is a discount of 40.3% on the current level.