It is Very Expensive to Hedge Cannabis Stocks
$TLRY, $MJ, $SZT, $SPY
Skyrocketing marijuana stocks have driven the $560-M ETFMG Alternative Harvest ETF (MJ), up more than 60% since mid-August. At the same time, the cost of options to protect against a 10% drop in the fund has surged to an all-time high relative to those betting on gainers of the same magnitude.
The rally in the ETF, which last year changed its focus from Latin America real estate to cannabis-related stocks, comes as marijuana companies surge ahead of the full legalization of weed in Canada next month.
Canopy Growth Corp., the ETF’s biggest holding, has 2X’d in value since mid-August when Constellation Brands Inc. announced a $3.8-B investment in the cannabis grower.
Tilray Inc.(NYSE:TRLY), the fund’s 3rd-largest holding, has increased more than 700% since its debut just 2 months ago.
The ETF (MJ) rallied as much as 12% on Tuesday to 41.50, a record high, compared with a 0.6% gainer in the S&P 500 Index (SPY). The marijuana fund’s 30-day historical volatility rose to the highest marks since January Vs the benchmark S&P 500 index
The House Judiciary Committee last week passed a bill to require the Justice Department to issue at least 2 more licenses to US facilities to grow marijuana and cannabis for research.
Marijuana compounds have been imported for clinical trials before, including by Britain-based GW Pharmaceuticals, which won approval this year to sell its purified CBD capsule, Epidiolex, to treat severe forms of epilepsy, the 1st cannabis drug approved by the US Food and Drug Administration
The news lifted the entire cannabis sector: Aurora Cannabis Inc. climbed 7.3%, Canopy Growth advanced 7.5% and Cronos Group Inc. jumped 19%.
|NYSE:TLRY||155.1||18 September 2018||34.91||134.65||155.1||132||18,837,480|
|HeffX-LTN Analysis for TLRY:||Overall||Short||Intermediate||Long|
|Very Bullish (0.60)||Very Bullish (0.69)||Very Bullish (0.62)||Very Bullish (0.50|