Pot stocks have exploded in popularity over the past couple of years and one retail broker is taking a novel approach to the nascent industry. Catering to the growing demand for weed-based products, Markets.com, a contract-for-difference (CFD) broker, is launching a pot Blend.
Now I know what some of you reefer rats are thinking, and no, Markets.com is not going to be selling its own strain of skunk. Instead, the broker is offering its clients the chance to trade in a ‘blend’ of different pot companies in one CFD.
“You really can think about the Blend as an index – we can add and remove stocks and the weightings are determined by market capitalisation.” Markets.com CEO, Joe Rundle, told Finance Magnates, “it’s totally unique as it’s a very custom-built product that gives traders access to a single corner of the market that they cannot get elsewhere.”
The new pot product is not the only Blend that Markets.com offers. Traders using the broker’s services can trade in companies such as Apple, Amazon, and Facebook via its e-commerce, social media and US tech Blends.
Traders may be less familiar with the marijuana-focused companies that make up Markets.com’s new pot Blend. Cronos, a medical marijuana company, Tilray, a grower, and Canopy, a technology start-up, are included amongst the six firms that make up the Blend.
Neil Wilson, Markets.com’s Chief Market Analyst, said to Finance Magnates that, though pot stocks continue to face some liquidity problems, things should improve over time.
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“We have a range of growers and companies in the pharmaceuticals space so [the Blend is] a good representative spread of companies.” Noted Wilson, “they need to be liquid enough so there were some restrictions but the good thing is that we can add to the Blend as more stocks become available and reduce transaction costs for customers in the process.”
Markets.com – Lowering Volatility for the Potheads
What, you may ask, is the appeal of such products? As with most markets that experience a sudden boom of interest, prices are volatile. According to Rundle, blends, whether they be in pot or e-commerce, can reduce that volatility and the risks involved.
“A lot of these stocks have proved quite volatile and could put people off.” Said Rundle, “finding a way to smooth out some of that volatility for traders whilst still enabling them to take a position in the market has led us to create this new product.”
Pot may be the current craze, but it won’t be the last blend that we see from Markets.com. From trade wars to trading giants, Wilson assures me there’s a lot more on the way.
“Our Gurus Blends will let traders access the portfolios of the smartest investors – Warren Buffett, Carl Icahn and Bill Ackman.” He said, “another exciting Blend is Trade War Winners and Trade War Loser, which lets traders take a position on where they think the current trade tensions are heading.”
Given the widespread sense of glumness in the retail industry following the implementation of the European Securities and Markets Authority’s product intervention measures in August, it’s positive to see brokers still innovating and creating new products. Long may it continue.