We covered how and where to buy Cannabis stocks a while ago, but now Plus 500 has launched a Cannabis index tradable via their CFD platform.
The Cannabis Index is a CFD based on the price of the BGCANG BITA GLOBAL CANNABIS GIANTS.
The cannabis index includes large Cannabis companies like Tilray, Aurora Cannabis and GW Pharmaceuticals. however, on neither the BITA website and Plus 500’s website we couldn’t find a full constituents list.
If you are thinking of trading Cannabis as a CFD here is a quick rundown of the pros and cons of trading a Cannabis Index rather than the individual stocks.
For more information on trading, Cannabis products read our Opportunities And Risks In The Cannabis Sector report
You diversify your risk with a Cannabis Index
Cannabis companies are very high-risk investments because they are in a volatile sector. Bioscience stocks are choppy enough without the added morality and legal issues that the medical marijuana industry faces.
So, expect big moves in individual stocks are they fight for regulatory approval of their products.
By buying or selling an index you are not quite so exposed to these individual stock movements.
However, you are still susceptible to the volatility of the index. So if there is an overall legal or regulatory change in medical marijuana, then expect big moves in the index.
You can get leverage trading through cannabis CFD Indices
This isn’t necessarily a good thing as the current Plus 500 margin rates allow you to get $500 exposure with $100 on deposit (1:5).
The benefit is of course if you call the market right you multiply your profits, but if you lose, you’re losses are also increased.
You’ll pay overnight financing charges
If you buy a Cannabis ETF of ETN you are buying a listed basket of stocks that is actively managed by the provider. There will be charges from the provider and your broker for holding the ETF, but they won’t be as large as the financing charges for holding a cannabis CFD index position.
For example, you’ll pay interest on long and short positions with Plus 500 at the moment. Daily rates are:
Overnight Funding – Buy-0.0300% (10.95% per year)
Overnight Funding – Sell-0.0169% (6.1685% per year)
Where else to trade Cannabis Stocks
You can compare all CFD and spread betting brokers here are three alternative brokers to trade Cannabis with:
- IG – wide range of spread betting markets on cannabis
- Saxo – buy physical cannabis ETFs or trade them as a CFD
- eToro – a social trading network where you can copy other trader or their Cannabis Care Copy portfolio
Live Cannabis Stock Index CFD from Plus 500 Price & Chart
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Richard started the Good Broker Guide in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.