Pot stocks kicked off the session in the red, after a Politico report indicated the U.S. could ban Canadians working in the marijuana industry from crossing the border. Shares of Canopy Growth Corp (NYSE:CGC) were no exception, falling as low as $40.68 -- territory not charted in about three weeks -- before reversing higher. At last check, CGC stock is up 3.5% to trade at $45.62, but one options trader appears to be expecting a drop for the weed stock by Friday, Oct. 19 -- two days after Canada will legalize recreational pot use.

So far today, Canopy Growth has seen roughly 34,000 put options change hands -- three times the average intraday pace. Much of the action appears attributable to a three-way spread in the October series, with simultaneous blocks of 4,000 30- and 45-strike puts traded at the same time as a block of 8,000 October 37.50 puts.

Digging deeper, it appears the speculator initiated a long put butterfly spread on CGC shares. Specifically, it seems the trader bought the "wings" of the butterfly (the 30- and 45-strike puts) for a total of $5.40 per pair, and then sold twice as many of the 37.50-strike puts for $1.80 each. The net cost of the trade would be $1.80 per spread ($5.40 - [$1.80 * 2]), or $720,000 (cost per spread * 100 shares per contract * 4,000).

The maximum profit on the trade would be the difference between the bought and sold strikes, less the net debit -- or $5.70 per spread ($7.50 - $1.80). The trader will achieve this if CGC shares settle squarely at $37.50 (the sold strike) upon October options expiration. From current levels, that represents a drop of nearly 19%. As long as the stock ends between the breakeven rails of $31.80 (lower wing plus net debit) and $43.20 (upper wing minus net debit), the investor will profit. If CGC finishes below $30 or above $45 at expiration, the trader will forfeit the entire net debit.

On the charts, weed stocks had a banner August, with Canopy Growth shares soaring nearly 74% for their best month since November 2016. The stock has taken a breather since touching an annual high of $56.59 on Sept. 5, but still remains more than 450% higher year-over-year.