Big Money Making Opportunity

[Gregmal]

In the marijuana space. Just depends on what side. Curious to see if anyone is playing this and how they are putting their ideas into action. Personally I think there are several money in the bank opportunities with to sell longer dated calls on names that have gone up 3-4x in the past few weeks, 30-50% higher than their current prices, for staggering premiums.

 

Some examples, CRON has calls going out to 2019 at $25 where you can get $1-$2  share.

 

TLRY you can sell the $115 March Calls for $12, which also happens to get you past the IPO lockup.

 

Valuations were said to be stupid at much lower prices, this lately just seems to be a squeeze and the retail idiots trying to retire early, so I can't really think of a better and cheaper way to play it than above. Certainly better than paying 50-100% borrows or paying massive premiums for puts. Did the same thing with some of the Bitcoin plays like RIOT and also several of the other "fad" stories we've seen the past few years. Have found this to be effective along with selling deep in the money calls as well.

 

 

[JRM]

So what is the trade?  Sell a naked call, or buy a grossly overvalued stock and sell a covered call?  Is selling a call spread more appropriate here?

[Gregmal]

So what is the trade?  Sell a naked call, or buy a grossly overvalued stock and sell a covered call?  Is selling a call spread more appropriate here?

 

It's kind of a question to anyone who is playing this "rally". My trade, is effectively shorting the calls. TLRY for example selling ITM calls, IE $50 strike at least several months out(this is basically the best way to outright short while getting around the hard to borrow fees), and/or selling the far OTM calls for massive premiums(more or less betting this doesn't appreciate an insane amount further, plus also holds those insane levels).

[Ghost]

Looks like another chance, to make a move.

[Gregmal]

IV has come out of the options a little bit, but there's still enough there to be worthwhile. You're basically trading against tards at this point. No one in their right mind is buying at these valuations. $2M contract announcement causes 900M market cap increase? Okayyyy. That and traders, which IMO are just speculations/gamblers, another form of stupid counter parties. Personally I don't think we've seen the top yet.

 

IB had borrow at nearly 325% earlier, so being outright short is silly as well. Lot of different ways to play this.

[Ghost]

Past 110. 

tough being on the short-side of this.

 

https://www.bloomberg.com/news/articles/2018-09-12/you-couldn-t-short-high-flying-tilray-even-if-you-wanted-to

 

[Gregmal]

Past 110. 

tough being on the short-side of this.

 

https://www.bloomberg.com/news/articles/2018-09-12/you-couldn-t-short-high-flying-tilray-even-if-you-wanted-to

 

Saw that last night. Pretty incredible there are people paying 30% per month to short this. Utterly stupid. Especially when, as I've mentioned, you can put on essentially the same trade, IE short a longer dated $20,$30,$40, etc call, pretty much for free. This whole thing is pretty breathtaking though. The other names, CGC, CRON, etc already look to have cracked.

[LC]

Past 110. 

tough being on the short-side of this.

 

https://www.bloomberg.com/news/articles/2018-09-12/you-couldn-t-short-high-flying-tilray-even-if-you-wanted-to

 

Saw that last night. Pretty incredible there are people paying 30% per month to short this. Utterly stupid. Especially when, as I've mentioned, you can put on essentially the same trade, IE short a longer dated $20,$30,$40, etc call, pretty much for free. This whole thing is pretty breathtaking though. The other names, CGC, CRON, etc already look to have cracked.

 

Been a while since I created positions via options but isn't there an arbitrage opportunity then, to buy the shares and lend them out (pocket the 30% or whatever your broker gives you) and recreate the opposite position via options so you are market neutral?

 

edit: nevermind - you'd have to go long the puts which should have the 30% carry baked in.

 

 

[Gregmal]

Past 110. 

tough being on the short-side of this.

 

https://www.bloomberg.com/news/articles/2018-09-12/you-couldn-t-short-high-flying-tilray-even-if-you-wanted-to

 

Saw that last night. Pretty incredible there are people paying 30% per month to short this. Utterly stupid. Especially when, as I've mentioned, you can put on essentially the same trade, IE short a longer dated $20,$30,$40, etc call, pretty much for free. This whole thing is pretty breathtaking though. The other names, CGC, CRON, etc already look to have cracked.

 

Been a while since I created positions via options but isn't there an arbitrage opportunity then, to buy the shares and lend them out (pocket the 30% or whatever your broker gives you) and recreate the opposite position via options so you are market neutral?

 

edit: nevermind - you'd have to go long the puts which should have the 30% carry baked in.

 

While there isn't really an arbitrage opportunity per say, I think there are ways similar where the odds are very much in your favor. At the current HTB fee of 370% annually, if you went long the stock while selling a longer dated $20 call, you are in an arbitrage position after what? Maybe 3 weeks, assuming the stock stays around here, or goes higher? Even if it goes lower, you would be hedged down to $20, essentially meaning the trade equation works for you if the stock doesn't go below $20 before the short rebate covers the difference. This situation(TLRY) is very fascinating to me on multiple levels.

[LC]

Yeah these types of pop-status investments (Weed, Crypto, etc.) are starting to interest me in terms of learning how the hell to make some money off the stupidity of a market saturated with uninformed buyers.

 

Buy the stock to lend, sell the call.

 

Let's use the Mar'19 30-strike Call as it has more volume. You're exposed below:

 

Stock Price - Call Premium - Interest received

 

120 - 89 - 6 months of borrow

 

In the worst case, you'll need to make $30 in borrow between now and March 19 to break even if the stock goes to zero. Anything else is gravy.

 

Also; you might want to use Eric's cost of leverage on the option chain to see which options have the cheapest embedded interest rates. You can perhaps play it that way as well: buy the stock to lend, cover yourself with options having the cheapest embedded rates (this is actually the same thing we are talking about but now we are quantifying it - you may be able to find better priced (in terms of embedded leverage costs) options than the low-strike Mar19 calls. )

 

[RichardGibbons]

Buy the stock to lend, sell the call.

 

Let's use the Mar'19 30-strike Call as it has more volume. You're exposed below:

 

Stock Price - Call Premium - Interest received

 

120 - 89 - 6 months of borrow

 

In the worst case, you'll need to make $30 in borrow between now and March 19 to break even if the stock goes to zero. Anything else is gravy.

 

I suspect the call buyer would exercise the call immediately, so you wouldn't get the chance to lend your stock.

[Ghost]

Not that I understand technical analysis, but it seems all the markers for today point higher.

 

[Gregmal]

Not that I understand technical analysis, but it seems all the markers for today point higher.

 

The tards are insatiable, but it always ends the same. Literally EVERYONE in this is short term, which is an advantage to longer term investors. I get a kick out of reading some of the commentary on this. "It's cheap because it's down today and CGC and CRON are up"... This is who's on the long side of this stock.

[Ghost]

Look at this one go.

Past 145$ this am.

 

[Gregmal]

Borrow is around 600%. Never seen that before.

[IanBezek]

Shorting these sorts of manias is one of the fastest ways to blow up an account. If you do want to short calls, please use spreads, otherwise this sort of move can lead to ruin.

[hillfronter83]

Just for experiment/speculating, I bought a covered call position: sold 3/2019 $20 call for $126, bought 1 share TLRY for $147. If borrowing rate stay around 300%, I need about a month to break even.

[bizaro86]

Did you mean to say you bought 100 shares? Because one option contract is for 100 shares, so if you just bought one your call isn't really covered.

[hillfronter83]

Did you mean to say you bought 100 shares? Because one option contract is for 100 shares, so if you just bought one your call isn't really covered.

 

Yes, 100 shares. This is more like a trading experiment. I feel like I'm long mania: hope it stays long enough that I can collect more lending out the shares. But no doubt, IB will be the biggest winner here, lol.

[JRM]

I wonder if a short call spread could be timed around the expiration of the lockup period for Tilray (1/15/2019)?  For some reason I'm not able to see bid/ask spreads for March 2019 or January 2020 expiration. 

[Gregmal]

Insanity LOL $220

[gfp]

Yes - wow, at 235 a share on Tilray someone is getting killed here. 

[gfp]

Shorting these sorts of manias is one of the fastest ways to blow up an account. If you do want to short calls, please use spreads, otherwise this sort of move can lead to ruin.

 

 

Sound advice here!  Ian I remember you from several years ago when you authored an article on Yongye International - I think you were pretty young at the time.  I had investigated that company, including on the ground in China.  It was shady.  Went private at $7.10.

[Ghost]

wow...look at this go. 

Interesting to watch.

[Gregmal]

I guess one of the more interesting aspects here is this. If you're getting 30% a month, or even more in some cases, doesn't that incentivize people to hold even further? INcredible stuff here