The Reason I Don’t Trust Cannabis Stocks

Mark’s Watchlist: Why I’m Staying Away from Cannabis

I’m giving you one option that’s under a dollar on one of these stocks. Learn how you can get up to five cheap option recommendations per week by clicking here.

1. Salesforce.com Inc. (NYSE:CRM)

CRM has lost almost 4% over the past five days – but now, it’s just a couple ticks away from touching it’s 50-day MA:

Once that happens, I wouldn’t be surprised if we’re at a level where we can bounce. Implied volatility (IV) isn’t particularly high on this name, and considering this is a $255 stock, the October $260 calls are a relatively inexpensive play at about $5.

I’d wait for CRM to hit its 50-day, and then boom – cash in on a call to play the bounce for a nice payout.

2. Canopy Growth Corp. (Nasdaq:CCG)

Everyone thinks that Canada is going to be a huge player in the growth of U.S. cannabis. But I’m not so sure. I’m worried about Canadian drug companies like CGC. I mean, this thing is like a falling knife.

Over the past month, it’s lost nearly 14%. The past six? More than 57%!

It can be tempting to dive into a fast-falling name like this when there’s so much in the media about cannabis’ potential. But I’d be wary here – I’m not sure we’ve hit the bottom yet.

3. Advanced Micro Devices Inc. (Nasdaq:AMD)

Before we get into today’s impact money trade, I want to give you a bonus big money name: AMD.

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We just saw a customer step in and buy the $105 straddle… 15,000 times. This is a trade that’s just looking for blanket movement.

With 31 days until expiration, this buyer is looking for about an 8% move in AMD. Now, this stock has been moving, don’t get me wrong. But it tends to fly up and down in the same range. It takes big runs from $110 to $115, then drops near $100, then bounces again.

This customer is looking for a big breakout – and there are a few ways you could piggyback this trade.

Me, well, I’m long the $110-$120-$130 call butterfly to try and take advantage of some sort of near-dated bounce in this name. You could also buy the bottom rung of the trade – the October $110 calls – outright. Or, you could construct a call spread by selling the $120 calls against it.

With a potential run to $120, these would make for a nice payout.

Today’s Impact Money Trade

Today, we’re looking at big money on a small-money stock – Ring Energy Inc. (NYSEAMERICAN:REI).

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This is only a $2.60 stock, but IV is absolutely exploding – and as you can see, call buyers are coming in hard.

The stock had a breakout day yesterday with 20X normal trading volume and an 8% pop. It’s since fallen from there, but you could buy the stock here for a cheaper price…

Or look at the December $2.50 calls for $0.55, paying an extra $0.15 for two more months of time than this big money trade.

VIX Traffic Light

Today’s VIX light remains yellow after a 5%-plus rally over the past five days.

The VIX is still trading above the September futures, but a big spread between October futures and the cash index has dampened any real gains in UVXY. We’d need a huge leg up in the VIX for these to take off, so for now we’re holding our put.

You can track its performance right here!

I just sent a trade recommendation on UVXY to my lifetime Profit Revolution members – and the next lifetime recommendation comes on Friday!

Learn how you can get on the list to receive it by clicking here.

Until next time,

Mark Sebastian

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