US CANNABIS: MacroDoζer Summer Special 4/5
While Everybody Enjoys Summer, Sun and Vitamin D, We Had to Get Empirical on Other Recreational Measures.
Executive Summary
Who cares about plants with mind-altering properties?
Michael Pollen and the Apache tribes will tell you more.
Democrats revitalize the cannabis talk, and pot starts flashing on my screens.
Enthusiasts compare it to The Noble Experiment and the legalization of alcohol.
We keep it cool and bet on less directional weeks with a slightly bullish risk-defined straddle.
1. Why Do I Care Right Now?
Why not care about plants with mind-altering properties? That’s the deeper and more meaningful question.
Rant Around Cannabis
I am no big fan of the sativas or indicas of this world. It slows down my middle-aged brain, takes away drive and motivation for days, and occasionally gives me skin rashes. It also suppresses dream sleep, the nightly cleansing of the brain I need for general sanity, productivity, and inspiration flashes.
Add holotropic breathwork and post-work-out sauna to the mix, and getting me out of the flow will be challenging.
Nevertheless, many people find god & bliss in the cannabis plant. And now that North America decides to arbitrarily legalize one plant out of mother nature’s expansive arsenal - Michael Pollen tries to elaborate - we might as well take part in the securitization and market conquest.
The US Cannabis ETF, MSOS, has started to flash up on my volatility screens for a few weeks now. Democrats have revitalized legalization talks, and I slowly feel upward pressure rising. Esthetically speaking, the last sixteen months show a near-to-perfect bear market slope. Permabears or DEA officials call it heaven. An 80% drop in price since its February 2021 highs should be a long-enough hangover; who is rolling the next Jay?
Never mind. We use the 80% mark to bet on less directional weeks before the trend continues or breaks to the upside. We are happy to call both Fibonacci extension zones our upper and lower boundaries. With our risk-defined straddle, we can sleep, even without the THC.
2. Useful Background Information
The AdvisorShares Pure US Cannabis ETF, MSOS, is actively managed; it only invests in US companies.
People get excited about the future of US cannabis due to the immense market size and vast product and service range. In addition, it will be highly regulated, hence protected against potential Canadian or European first-mover competitors. Enthusiasts already compare those innings to the National Prohibition of Alcohol, The Noble Experiment, and its subsequent legalization in 1933.
MSOS’s top five holdings make up more than 60% of the overall portfolio:
Trulieve Cannabis
Curaleaf
Green Thumb Industries
Verano
Cresco Labs
The ETF covers the marijuana and hemp industries in the United States and derivatives with similar economic characteristics. In addition, a portion of the funds is allocated to pharmaceuticals, biotechnology, and life sciences within the health care sector.
3. Trade Execution
We are selling our classic, slightly bullish risk-defined straddle at 12, with wings at 8 and 16. Break-evens are at 9.8 and 14.2.
Trade Entry - Aug 2, 2022
1) Short Call 12, Sep 16, 2022: 1.00 Credit.
2) Short Put 12, Sep 16, 2022: 1.50 Credit.
3) Long Call 16, Sep 16, 2022: 0.30 Debit.
4) Long Put 8, Sep 16, 2022: 0.15 Debit.
Total: 2.25 Credit.1
4. Final Comments
Expect updates on BrainDoζers within 4-6 weeks. We use the exact heading, ending with (+/- xy%), and label the cover cartoon with a red Doζed stamp. That way, the performance will be easy to follow.
We are not sending BrainDoζer updates via email unless you specifically ask for it here. We want to keep the information flow light and to the point. You can still freely access all updates on MacroDozer the moment they are released.
My name is Juri von Randow. You can find me on the top banner to the right. MacroDoζing, as if there was no tomorrow. (Email version only.)
Feel free to share. Sincerely.
Total credit equals the sum of the mid-prices of each bid/ ask spread. Brokers usually get filled mid-price for liquid options.
My classical approach to investment dictates that I try before I buy. How do I preserve this business tradition whilst ensuring optimal and uninhibited decision making?