S420: The First Ever US Cannabis Equity Index Future Contract

S420: The First Ever US Cannabis Equity Index Future Contract

The Small Exchange celebrated its one-year anniversary with the launch of the first futures contract on marijuana stocks.

Small Cannabis, listed under the S420 symbol, is based on an index that includes 21 producers and distributors of medical and recreational cannabis products. Among the companies included are Tilray Inc TLRY, Canopy Growth Corp CGC and Cronos Group CRON.

A First Of Its Kind

The Small Cannabis S420 futures contract is the first to offer the capital efficiency of futures on a basket of equities that is designed to track future growth in the cannabis industry.

As of the product's launch on June 21st, one contract has a notional size of approximately $1,200 with a capital requirement of just $204 initial margin to trade. Investors and day traders alike can enjoy diversified access to this burgeoning asset class in a product that utilizes approximately 50% less capital to trade than ETF alternatives.

The new S420 futures contract provides well-rounded exposure to this relatively young stock sector while reducing the specific risk of single-name equities. The product trends more with the supply and demand of cannabis products themselves than with earnings releases of any particular company in the cannabis ecosystem.

Small Cannabis’ unique exposure also offers a diversification play for those invested in popular equity benchmarks like the S&P 500 given its positive, but low correlation to products like SPY and QQQ.

“We are incredibly proud to be the first to deliver this opportunity for investors and traders alike,” Donnie Roberts, president and CEO of the Small Exchange, told Benzinga.

“The unique offering the S420 affords can be both more adaptable for smaller investors and more scalable for day traders. The product's distinctive nature means that it can provide opportunity even on inside days in the market at large. Small Cannabis futures are the first of their kind, and they could be the start of even further interest in the cannabis asset class by providing the ability to speculate and manage risk more efficiently for all participants big and small.”

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