DEA Delay That Changes Nothing. Cannabis Stocks panicked

It's a Delay That Changes Nothing, but the tape is an ugly opportunity

We published at 5:09 PM Tuesday. The order was a briefing schedule, the cream still rises, assume the news won't happen. Wednesday morning the tourists proved every word of it.

$MSOX down 23%. $TRLV down 15%. $GLAS down 13%. $GTBIF down 12%. $MSOS down 11%, and it tripped a volatility halt on the way. $CURLF got off easy at minus 7%. By 11 AM the ETF had already traded 5.2 million shares. Tuesday's entire session was 5.25 million. A full day of selling before lunch, into a piece of paper that decides nothing.

We're not going to pretend this is a mystery. We wrote the playbook Tuesday night and the sector ran it Wednesday morning. So we'll go through it again, slower, for the people in the back who bought the rip on the 22nd and sold the stay on the 30th.

Nothing has changed, especially the Paper Hand investors

Read the order. Not the tweet about the order. The order. Judge Julius told DEA to file up to 20 pages by October 13 on whether the record should reopen to take in a GAO report. That's it. No ruling on Schedule III. No ruling on adult-use. No ruling on anything except whether he'll read one more document.

And the document isn't what the bears think it is. The GAO audited process, not the plant. It said DEA and FDA lack written procedures for how staff evaluate drugs. It also found DEA's scheduling calls lined up with HHS recommendations from 2020 through 2025. DOJ, DEA, HHS, FDA and NIH all agreed with the report's recommendations. That's the government saying "fine, we'll write it down." The GAO didn't say marijuana belongs in Schedule I. It didn't say anything about where marijuana belongs.

Meanwhile DEA's own final brief asked Julius to "expeditiously recommend" Schedule III. The agency that has to write the 20 pages is the agency that wants this done.

What Tuesday's order didn't touch: April. State-licensed medical marijuana is Schedule III. 280E is off medical for tax year 2026. Trulieve sold the same flower Wednesday it sold Monday, at a 63% gross margin, on the NYSE. Cantor looked at the stay and reiterated Overweight with a $15 target. The stock's $10.50. Somebody's wrong, and it isn't the people who read the filings.

A two-week delay is procedural

September 29 to October 13. Fourteen days. That's the whole delay as it stands. A calendar entry.

Best case, Julius reads DEA's response, denies the motion, and sends his recommendation up to Administrator Cole a few weeks later than he would have. Worst case, he reopens the record, everybody files another round of briefs, and the recommendation drifts into 2027. Both are procedural. Neither is a verdict. The hearing took testimony in June and July. The briefs are in. The only thing left is one man's recommendation on adult-use.

Now the part the panic crowd never hears. We assumed it wouldn't happen anyway. That's been the rule since 2014. Assume the news won't happen, own the operators that don't need it, trade the layer around them. Every headline in this saga has been sold, and we've been keeping the file. Under that rule, a two-week delay to a thing we weren't paying for costs exactly nothing. If a briefing schedule hurt you, you were paying for the news. That's a you problem, and we said so Tuesday.

Hope is not a strategy

This sector has the weakest hands in the market. That's not an insult. It's a measurement. The volume says it. The options chain says it louder.

Pull up the $MSOS board. The Oct 16 $6 calls carry 52,039 contracts of open interest. Fifty-two thousand. That's 5.2 million shares' worth of a bet that $MSOS finishes above $6 in sixteen days. From $4.52. A 33% move. There's 38,707 of open interest on the Nov 20 $7s, 39,671 on the Dec $7s, and 43,848 on the Jan $10 calls. Jan $10 needs a 121% rally.

None of that is analysis. It's a scratch-off ticket with a Friday printed on it. Somebody's whole strategy was a headline landing on a specific date, and Tuesday the date moved. So Wednesday they sold everything, including the stocks that never needed the headline. That's what "hope and a headline" looks like on a tape. It's also why $TRLV was $10.50 and $GTBIF was $6.76 before lunch. Green Thumb bought back 8 million of its own shares last quarter at just over $6. Kovler's next round just got cheaper, and the guy selling it to him owns Jan $10 calls.

Hope isn't a strategy. It's a position size you can't defend.

Dan Ahrens has a ship to steady & have an 8mile moment

$MSOS is the only bid of size in this sector. Kovler said it on his own earnings call. So what the portfolio manager does with the fund's cash on a day like today matters more than what Julius does on October 13.

The book, per AdvisorShares' holdings file as of Tuesday: $TRLV 31.5%, $CURLF 28.5%, $GTBIF 16.4%. Three names, 76% of a $1 billion fund. Then $VRNO at 5.6%, $GLAS at 5%, and a long tail. $JUSHF is 2.3%. $VREOF is 1.4%. $LEEEF is 800,000 shares worth $148,720. That's 0.01% of the fund. A rounding error with a ticker.

Any bounce this sector gets comes off $CURLF, $GTBIF and $TRLV. Write that down. Not $VREOF. Not $JUSHF. Not a $0.19 stock with 800,000 shares in the fund. Those three are 76% of the only bid in the sector, so when they lift, NAV lifts, the ETF lifts, and the tail gets dragged along behind it. It never works the other way. If you're waiting on the tail to lead you out of Wednesday, you'll be waiting in 2027.

The math on the tail is ugly. Double $VREOF tomorrow and NAV moves 1.4%. Double $LEEEF and NAV moves one basis point. You can't rally this ETF with those names, and you can't defend it with them either. The only things that move NAV are the three at the top. Our read on Wednesday: the only one of the three that's truly liquid is Trulieve on the NYSE, so when redemptions hit a swap-based fund, that's what gets sold first. It's why $TRLV fell harder than the ETF that owns it. Trulieve is the ATM.

So Ahrens has two jobs. Hold the core. Every dollar that comes in or gets freed up belongs in $TRLV, $GTBIF and $CURLF, because those are the only positions where a bid shows up in NAV. And don't sell Green Thumb to feed the tail. If the fund is trimming $GTBIF to add to $VREOF, $JUSHF, $LEEEF or any of the other dog crap down the list, there won't be a bounce, because none of it moves the number.

Yes, we know the history. In March 2025 Kovler went at AdvisorShares on X, asked its CEO what his fiduciary duty was, and wanted a phone call before the fund offloaded shares. Green Thumb was 33% of the fund then. It's 16% now. Whatever that was, leave it at the door. The fund's own file shows the Green Thumb swap unchanged at 21,515,607 shares between Monday and Tuesday. Keep it that way. The best operator in the sector, buying its own stock at a 27% EBITDA margin, is not the thing you sell to fund a swap on a $0.19 stock.

How you catch the dealers offsides

Our rule is the core never moves. The layer does. Wednesday's flush is where the layer gets bought back, and down here the cleanest way to do it is options, in the money or right at it, with real time on the clock.

Not front week. Never front week. Look at the Oct 2 chain. The $4.50 calls traded 998 contracts Wednesday morning against 157 of open interest. People bought two-day lottery tickets on a stay. Those contracts have to be worth more than intrinsic by Friday afternoon to break even, and they won't be. Theta eats a two-day option alive, and there's no positioning behind the strike to squeeze. Front-week calls in this sector are designed to expire worthless. They're the house's product, not yours.

November 20 is the earliest expiration we'd touch. It gets you past October 13, past Julius's ruling on the motion, past the November 3 midterms, and into the MSO third-quarter prints. Four things that can move the tape, one premium.

The best risk/reward on the board is the Jan 15, 2027 $5 call. Open interest at that strike is 59,223 contracts. It's the biggest single line on the whole board, and it's the strike closest to spot with real duration. That's 5.9 million shares of notional parked at $5, in an ETF that traded 5.25 million shares all of Tuesday. If the dealers are short that paper, and the way this sector buys calls they usually are, every tick back toward $5 forces them to buy $MSOS to stay hedged. Through $5 they're chasing. That's offsides. It's how a 10% rally turns into a 20% rally in this name. Add the 26,309 on the Oct 16 $5s, 10,182 on the Nov $5s and 11,299 on the Dec $5s, and the whole board is leaning on one number.

Back-of-envelope on price. That Jan $5 call was worth about a dollar last week with $MSOS at $5.35. At $4.52 it's somewhere around 40 to 50 cents, give or take what implied vol did Wednesday. Check the live quote. If $MSOS gets back to $5.40, where NAV sat a week ago, that call is a buck again. If $MSOS is $6 on January 15, it's worth at least a dollar of intrinsic. If $MSOS is under $5 on January 15, it's zero. That's the whole deal. You size it like the layer, not the core.

The customary caveat

If the record reopens and the recommendation slips into 2027, January is dead money too. That's why the options are the layer and the shares are the core. You never own January calls instead of $TRLV and $GTBIF. You own them on top, in a size you can watch go to zero without it changing your day. Anyone who tells you the options are the trade is selling you the front week.

The reality in our view

Tuesday we said the order was a briefing schedule and the cream still rises. Wednesday the sector sold a full day's volume before lunch and handed us Trulieve at $10.50 and Green Thumb at $6.76. Nothing changed. Fourteen days is a calendar, not a verdict. The paper hands bought Jan $10 calls and called it a strategy. Any bounce comes off $CURLF, $GTBIF and $TRLV, so the ETF's cash belongs in those three, not in the feud and not in the tail. And if you want to catch the dealers leaning the wrong way, it's the Jan $5 call, not Friday's.

We warned you Tuesday. This is what listening would've looked like.

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Disclosure

We are long Trulieve $TRLV, Green Thumb $GTBIF, $MSOS and $MSOX, and we hold options that expire into 2027, including $MSOS calls and we always fade guys named Todd. Positions can change without notice. StockAlpha.ai content is for informational and educational purposes only. It is not personalized investment advice. Options involve risk and can expire worthless. Always consult a qualified financial advisor before making investment decisions.