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CHERRY PICKS
R I PE & J U I CY T RA D E I D E AS
The Top Cannabis Stocks By Michael Rechenthin
ith legalization of pot gaining traction across the country, it’s no surprise that cannabis stocks are becoming more popular. The list of publicly traded cannabis companies below is sorted according to the amount of stock traded daily. For example, Canopy Growth (CGC) trades an average of $162 million daily (see Light this Candle, pg. 49). All of the ticker symbols mentioned here are considered cannabis stocks, which is actually more difficult to quantify than it may seem.
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The average healthcare stock has an implied volatility of 14%. The average pot stock has an implied volatility of 66%
Some companies like Canopy Growth, Tilray (TLRY) and Cronos Group (CRON) are directly related to the cannabis industry and therefore make the list. Other companies, such as AbbVie (ABBV), didn’t make the list, even though they appear in other cannabis-related lists. For example, AbbVie markets Marinol—synthetic cannabis that combats weight loss and vomiting in chemo patients and patients with AIDS. While it offers that and other cannabinoid receptor drugs, it’s too much of a stretch to count it as a “pot stock.” Several things stand out with these companies: Negative earnings. Most cannabis stocks haven’t made money yet, as shown in negative price-to-earnings (P/E) ratios. Small companies. Many just aren’t as big as more mainstream companies. High implied volatilities. The average
healthcare stock has an implied volatility of 14%. The average pot stock has an implied volatility of 66%. That means the average pot stock has an expected daily volatility nearly five times greater. The market is placing a ton of risk on these stocks—caveat emptor. But with the right strategy, luckbox feels OK with high volatility. Instead of buying the stock outright, consider selling the at-the-money put or buy the stock along with a short-call. That may provide more room to be wrong and therefore a high probability of success. Michael Rechenthin, Ph.D., (aka “Dr. Data”) is head of research and data science at tastytrade.
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Roll call This list of cannabis sector stocks is sorted according to the amount traded daily, which provides a good way to judge the market’s interest in a stock. Symbol
Name
July Market Capitalization (Billions)
CGC
Canopy Growth Corp
14.0
TLRY
Tilray Inc.
4.8
CRON
Cronos Group Inc.
2.9
ACB
Aurora Cannabis Inc.
7.8
GWPH
Gw Pharmaceuticals Plc
5.3
ZYNE
Zynerba Pharmaceuticals Inc.
0.3
APHA
Aphria Inc.
1.1
NBEV
New Age Beverages Corp.
0.4
CTST
CannTrust Holdings Inc.
0.5
CRBP
Corbus Pharmaceuticals Holdings Inc.
0.5
-6.5
HYGS
Hydrogenics Corp.
0.2
XXII
22nd Century Group Inc.
0.2
50
luckbox | august 2019
Average Daily Notional Traded Volume
Implied Volatility
-26.9
$162,936,486
46
-51.6
$93,239,161
77
-198.3
$84,928,952
62
35
$77,287,584
44
-18.0
$47,536,083
39
-8.1
$25,819,435
133
23.0
$22,551,302
61
-32.3
$15,191,901
68
-39.9
$11,952,722
71
$5,593,299
62
-17.2
$3,461,537
11
-21.6
$2,391,059
77
P/E Ratio
