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Bearish outlook:
If you have a bearish outlook on the marijuana stocks then your new best friend could just be HMJI (the inverse fund).
Question: How did the panda lose his dinner?
Answer: He was "Bamboozled"!
OK, and on that bearish note lets’ put on our bearish thinking caps and dive into some trading thoughts. While it is possible that you could open up a short position against individual stocks or even purchase put options, not every trader is entitled or has the ability or aptitude to do this successfully. Wrapping this all up under one ETF can make the process much more streamlined and simplified for a trader. Some of the benefits of being bearish via an ETF as opposed to actually shorting stocks include:
Reduced commission fees (unless only shorting one individual stock)
Less individual stock risk as the ETF contains a bucket of companies and an unexpected company-specific event will not be as drastically felt as if you held an open short position on it in the
event they become are offered a bought deal at a higher price for example.
Remember Tilray being seemingly overvalued but running up 300. It would be painful to have a margin call there. Yikes!
When you short a stock the potential of your loss is theoretically endless as there is no cap on how high a stock could trade. Whereas as an ETF is like a stock. It could go all the way to zero. If it goes all the way to zero you lose all of your initial investment. Still better than a theoretical infinite loss though.
Hedge:
One thing you may want to consider when you are uncertain about the near term future of the marijuana sector is to hedge your investments. So for example, you could remain long on companies X, Y, and Z, but also keep an open position in HMJI as a hedge. With a hedge, you can expect to reduce the volatility and help cancel out the noise in the day to day price movements. Even if all of the marijuana companies are sinking or rocketing, assuming your individual picks are a better performer than the overall sector as defined by the contents within the HMJI ETF then you will stand to make gains. This, of course, is not guaranteed to work, but with your expertise that you have acquired from our magazine and a professionals help this may be an approach worth considering when you are uncertain or feel the overall sector is not overly bullish but are still bullish on your specific companies you are invested in - at least more than the rest.
Extra Bullish outlook:
If you have a bullish outlook on the marijuana stocks then your new best friend could just be HMJU (the 2X leveraged fund)
Question: Where did the bull lose all his money?
Answer: At the “Cowsino”.