This Friday is the expiration of November options, and I’m happy to report that our three covered call positions expiring this week are in great shape. As is always the case, on Thursday afternoon or Friday morning, I will send a detailed breakdown of those positions expiring Friday breaking down our profits, and if we need to make any adjustments. Be on the on the lookout for that email.
Cabot Profit Booster 150
This Friday is the expiration of November options, and I’m happy to report that our three covered call positions expiring this week are in great shape. As is always the case, on Thursday afternoon or Friday morning, I will send a detailed breakdown of those positions expiring Friday breaking down our profits, and if we need to make any adjustments. Be on the on the lookout for that email.
Moving on to the market … It was another roller coaster week of trading as positive developments on the coronavirus vaccine sent cyclical stocks soaring higher, while growth stocks came under pressure. That was a totally fine development for the Profit Booster portfolio as we have a very diversified stable of stocks.
And in the interest of keeping the portfolio as diversified as possible, this brings me to the leader in the marijuana industry that just reported a strong earnings report.
The Stock – Canopy Growth (CGC)
The marijuana industry just got a little less “hazy,” as voters approved recreational use in Arizona, Montana, New Jersey and South Dakota, and medicinal use in Mississippi and South Dakota during this month’s elections, leaving just 15 states that still outlaw the product. The industry obviously cheered the news, and the continued move toward legalization should only benefit big players like Canopy Growth.
This Canadian company makes cannabis and hemp-based products, including dried flower, hemp, vape pens and cartridges, THC- and CBD-infused beverages, beauty, skincare, wellness, and sleep products, as well as edibles.
The company participates in both the medical and recreational segments of the industry, but recreational is its fastest-growing division (up 377% in the most recent quarter). It’s also a plus (especially in terms of investor perception) that beverage giant Constellation owns a big chunk of the company.
As for the numbers, Canopy has been sacrificing income for growth (though the loss of nine cents per share in Q3 was miles ahead of estimates), with the company delivering a 77% rise in revenues in the most recent quarter. Canopy is launching a variety of new CBD-infused products, including a CBD Wellness Gummies Sampler with Martha Stewart, and Quatreau, its first CBD-infused beverage line.
Moreover, with a Biden win, the future looks rosy for marijuana use in the U.S., including a possible passing of the Secure and Fair Enforcement Banking Act, which would allow financial institutions to legally do business with marijuana companies, as well as potential decriminalization of weed. Canopy is ready for a push into the U.S. partially thanks to its partnership with Constellation, and the recent election results only add fuel to the idea that the weed industry should see boom times for years to come.
Technical Analysis
Marijuana stocks were in a multi-year decline through March of this year, and the bounce was just OK after that, with most (especially the Canadian majors like CGC) still languishing. But there’s no doubt the stock’s character has changed of late; CGC has seen four huge-volume buying weeks since October began, including a terrific liftoff two weeks ago. There’s still a little old overhead to chew through, but we like the power—we’re OK taking a stab at CGC around here. Stop - 19
The Covered Call Trade
Buy Canopy Growth (CGC) Stock at 25, Sell to Open December 25 Strike Calls (exp. 12/18/2021) for $1.50, or a Net Price of 23.50 or less
Static Return: $150 per covered call (6.38%)
Breakeven: 23.5
Covered Call Return (if assigned): $150 per covered call (6.38%)
Please note, the stock and options prices will be moving throughout the day, so these prices are simply an approximation of prices that you should be able to achieve.
However, the important component of this equation is that the stock price paid, minus the premium received via the call sale, equals the Net Price, 23.50 or less. (In this case 25 minus 1.50 = 23.50. Or another example is you could pay 24.75 for the stock and sell the call for 1.25, which also equals 23.50)
For every 100 shares of stock you buy, you can sell 1 call. For every 200 shares of stock you buy, you can sell 2 calls. And so on …
Open Positions
