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Trade Statistics: Can a Market Be Due?

October 27, 2021 by Frank Kaberna| Tips & Strategies

Whether you prefer to buy something that’s up 100% or down on the year can say a lot about you as a trader. It’s the classic contrarian vs trend follower debate, and it’s playing out in spades among two of this decade’s most novel markets: cannabis and crypto.

MJ & BTC \ Pot Stock & Bitcoin Performance

Source: Yahoo! Finance (https://finance.yahoo.com/)

Both Bitcoin and pot stock ETF MJ rose 100% in the early part of the year only to fall back to unchanged; the former has eclipsed those elevated levels in recent trade, while the latter is sitting near its lows.

Pot Stock Performance

Though the two do, albeit surprisingly, boast a positive correlation, it might not be prudent for contrarians to play convergence between cannabis and cryptocurrencies or for trend followers to play further divergence.

Pot Stock Performance by Month

Jan Feb Mar Apr May Jun Jul Aug Sep
+28% +17% -5% -7% -1% -5% -13% -7% -13%

Source: MJ data from Yahoo! Finance (https://finance.yahoo.com/) as of 10/13/21

Focusing on cannabis as a standalone opportunity could show potential for both sides as a simple price extreme play. The do-or-die moment for pot stocks might pose an asymmetric return relative to risk given that they haven’t posted a positive month in the last seven and many single names are under $10.

Gain exposure to popular markets with standardized tick values and expiration dates on the Small Exchange. See why the smalls are making a big splash. >>

Micro Futures vs Small Futures

What’s better than buying a market (potentially) on the cheap? Doing so with the capital efficiency of futures! Small Cannabis futures not only share a +0.9 correlation to MJ shares,* but they also only require 20% of the product’s size in capital to trade.†

P/L Standard Deviation by Position

Micro Bitcoin Futures Micro S&P 500 Futures Small Cannabis Futures
$3,800 $1,200 $187

Inventorying this out-of-fashion stock sector while waiting for it to reach in-vogue status once again can be much less costly than doing so with hot crypto or tech stock markets.

Every so often, trend followers and contrarians can adjourn their rivalry and get on the same side of a major market extreme. Who knew pot could promote peace?

*Data from Yahoo! Finance (https://finance.yahoo.com) and dxFeed Index Services (https://indexit.dxfeed.com) as of 10/21/21
†Margin and Product Size taken from Small Exchange (https://smallexchange.com) on 10/21/21

—
To learn more about how the Small Exchange is merging the efficiency of futures with the clarity of stocks, make sure to subscribe to their YouTube channel and follow them on Twitter so you never miss an update.

© 2021 Small Exchange, Inc. All rights reserved. Small Exchange, Inc. is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission. The information in this advertisement is current as of the date noted, is for informational purposes only, and does not contend to address the financial objectives, situation, or specific needs of any individual investor. Trading futures involves the risk of loss, including the possibility of loss greater than your initial investment.

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Filed Under: Tips & Strategies

About Frank Kaberna

Frank Kaberna is the head content strategist at the Small Exchange. He produces everything from brochures to videos that inform on the Small Exchange’s products. After earning a mathematics degree from the University of Michigan, Frank traded interest rates at the Chicago Board of Trade. He then worked on the tastytrade Network as a content producer and on-air talent before landing at the Small Exchange.

Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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