Tilray's recent bubble pop has a lot of shareholders in panic mode. Despite the massive spread and a 60% drop from the high in just two days, an incredible amount of speculation still remains in the cannabis sector. What makes TLRY different than other cannabis stocks is the incredibly low float of ~18M shares, which serves to amplify the effects of speculative trading (in both directions). Compare the float to the average daily volume of 9M shares, and you will see what I mean.
TLRY touched the 38.2% fib level after market Friday, and according to the 5/26 MACD has some room left to drop. I set my fibonacci bounds to the high near $300, and low at listing price around $20. It is difficult to tell how far down something this volatile will go, but according to the setup we can expect a bounce around the $60-$80 price range (likewise, when the 26-EMA touches $100, a previous support/resistance level). There will likely be a mini-bounce around $100 but I do not count on it sticking. 5/26 MACD indicates we have at least a few days before this thing will start to find a bottom.
Implied volatility will be crushed as standard deviation reduces from the averaging of pump and dump outliers, which will in turn lower option premiums. Planning to buy some covered calls if the setup bites, otherwise reassessment will be necessary. Worst case scenario for this setup is that it hits the $60-$80 range and flattens, crushing option premium even further (which can be mitigated through use of covered calls combined with put credit spreads if necessary). A break under $60 is a possibility - if it turns out to be the case, I would suggest leaving Tilray alone until volume returns.
Recreational legalization in Canada on Oct. 17th along with TLRY being the first Canadian cannabis company to obtain operational license within the U.S. add fuel to the fire that is speculation. Also of note is the disruptive impact that cannabis companies will have on traditional pharmaceuticals, a market holding ~$1.1T capitalization. There is also the potential for more states to legalize cannabis for either recreational/medical use, or for federal regulations to step-up. These all fuel speculative interactions within the market.
A note on long term TLRY trades: there are 10M+ shares in lockup until January 2019, which will become public sometime then. I do not suggest holding any long positions into January as the market will likely react violently to the increase in float.
