TLRY Plummets 4.7% Amid Trump's Marijuana Reclassification Speculation: What's Next for Cannabis Stocks?

Summary
• Tilray Brands (TLRY) plunges 4.7% to $13.29, erasing a 72% five-day rally amid regulatory uncertainty.
• Intraday range widens to $12.73–$14.70 as Trump's potential Schedule III reclassification sparks sector volatility.
• Options chain surges with 266,448 contracts traded, signaling heightened speculative activity.

TLRY's sharp reversal underscores the cannabis sector's sensitivity to regulatory shifts. With Trump's reclassification rumors dominating headlines, investors are recalibrating positions as the stock tests critical support levels. The day's $2.00 range highlights the sector's precarious balance between optimism and caution.

Trump's Marijuana Reclassification Sparks Volatility in Cannabis Sector
TLRY's 4.7% intraday decline follows a 72% five-day surge driven by speculation that Trump's administration may reclassify marijuana from Schedule I to III. While the potential move would reduce federal restrictions, the stock's pullback reflects profit-taking and uncertainty over implementation timelines. The Department of Justice's delayed decision has created a 'buy the rumor, sell the news' dynamic, with investors reassessing risk exposure as the White House remains noncommittal. This regulatory ambiguity has triggered a sector-wide correction, with TLRY's 52-week low of $3.51 still a distant but looming concern.

Cannabis Sector Rally Falters as TLRY Trails Peers
While peers like Canopy Growth (CGC) and Aurora Cannabis (ACB) have surged 62% and 20% respectively over five days, TLRY's 4.7% decline highlights divergent investor sentiment. The Amplify Seymour Cannabis ETF (CNBS) has gained 71%, suggesting broader sector optimism despite individual stock volatility. This divergence may reflect TLRY's complex global operations and debt load, which could amplify downside risk compared to more streamlined competitors. However, the sector's overall momentum remains intact, with regulatory clarity still seen as a long-term catalyst.

Options and ETF Strategies for Navigating TLRY's Volatility
• RSI: 87.04 (overbought)
• MACD: 2.70 (bullish), Signal: 1.83
• Bollinger Bands: Upper $14.18, Middle $5.34, Lower -$3.51
• 200-day MA: $1.29 (far below current price)

TLRY's technicals suggest a volatile short-term outlook with key support at $13.50 and resistance at $14.50. The 87 RSI reading indicates overbought conditions, while the MACD histogram's 0.87 suggests bullish momentum. Traders should monitor the $13.50 level, with a break below triggering deeper correction risks. The sector's regulatory uncertainty makes leveraged ETFs less attractive, but options offer strategic opportunities.

Top Option 1: TLRY20251226C14
• Contract: Call, Strike $14, Expiry 12/26
• IV: 165.81% (high volatility)
• Delta: 0.477 (moderate directional sensitivity)
• Theta: -0.0939 (rapid time decay)
• Gamma: 0.1095 (high sensitivity to price swings)
• Turnover: 156,375 (liquid)
• Leverage: 11.53%
This call option offers aggressive upside potential if TLRY rebounds above $14.50, with high gamma amplifying gains from price swings. The 165% IV reflects market anticipation of regulatory news, but rapid theta decay requires a near-term move.

Top Option 2: TLRY20260116C12
• Contract: Call, Strike $12, Expiry 1/16
• IV: 129.18% (moderate volatility)
• Delta: 0.678 (strong directional bias)
• Theta: -0.0374 (slow time decay)
• Gamma: 0.0719 (moderate sensitivity)
• Turnover: 85,829 (liquid)
• Leverage: 5.10%
This longer-dated call provides downside protection with a $12 strike, ideal for a bullish but cautious stance. The 67.8% delta ensures participation in a rebound, while the 1/16 expiry allows time for regulatory clarity. Aggressive bulls may consider TLRY20251226C14 into a bounce above $14.50.

Backtest Tilray Brands Stock Performance
The backtest of TLRY's performance after a -5% intraday plunge from 2022 to the present shows mixed results. While the 3-day win rate is 43.50%, the 10-day win rate is slightly lower at 41.24%, and the 30-day win rate is 39.55%. The average returns over these periods are positive, with a 0.51% return over 3 days, a 0.14% return over 10 days, and a slight decline of -0.73% over 30 days. The maximum return during the backtest was 0.85% on day 20, indicating that while there is potential for recovery, the overall performance is modest.

TLRY at Crossroads: Watch for $13.50 Support and Sector Catalysts
TLRY's 4.7% decline tests critical support levels as the cannabis sector awaits regulatory clarity. While the 72% five-day rally has stalled, the stock remains 5.16% below its 52-week high of $23.20. Investors should monitor the $13.50 level—break below risks reigniting the 52-week low narrative. The sector's broader momentum, with CNBS up 71%, suggests long-term potential, but near-term volatility is likely. Sector leader Pfizer (PFE) down 1.35% highlights the pharmaceutical sector's mixed signals. For TLRY, the key catalyst remains Trump's reclassification decision—watch for $13.50 support or a regulatory breakthrough by year-end.