New Leveraged Marijuana ETF

Managers of the largest marijuana-focused Exchange Traded Fund now offer a 2X leveraged marijuana fund. Investors must ask themselves, “will this 2X leveraged fund give their portfolio what it needs right now to get back on track in 2022?”

The AdvisorShares MSOS 2X Daily ETF (MSOX) will offer investors a way to gain 200% exposure to the basket of marijuana stocks that the AdvisorShares management team deems viable investments.

The same company manages MSOX as the AdvisorShares Pure U.S. Cannabis ETF (MSOS). MSOS is the largest marijuana-focused fund by market capitalization at $631 million.

MSOS has overtaken the previous ETF to hold that title, the ETFMG Alternative Harvest ETF (MJ), which now has assets under management of just under $400 thousand.

With MSOS being as popular as it is, it makes sense for AdvisorShares to offer a 2X leveraged product. Especially with several states of local governments planning on voting on the legalization and decriminalization of marijuana use. If a few more states start allowing the use of marijuana, we may see the next big rally in the space. This would put MSOS and, of course, MSOX in an excellent position to capitalize on the move higher.

But making a profitable investment usually isn’t always relatively that easy. The MSOX or 2X ETF also deals with contango. The fund tells investors that MSOX should only be used for daily exposure, not a long-term holding.

Plus, little things like when a fund like this debuts is important. For example, the ETFMG 2X Daily Alternative Harvest ETF (MJXL) is essentially the same ETF as the new MSOX. They both offer investors 2X leverage on the marijuana industry.

However, MJXL debuted in July of 2021, and if you have followed the marijuana industry, you will know that industry has been down since around February 2021. The falling underlying assets or company stock prices and the daily contango effect have left MJXL with minimal assets under management. Currently, MJXL has just over $563 thousand in assets.

ETFMG also has the 2X inverted marijuana ETF, the ETFMG 2X Daily Inverse Alternative Harvest ETF (MJIN). This ETF allows investors to short the marijuana industry and get 2X the short exposure. Like MJXL, MJIN doesn’t have a lot of assets under management at just $9.95 million, but it is ten times more than MJXL currently has under control.

If the marijuana market continues to struggle, MJXL may be shut down very soon, leaving investors with only one option to get 2X leverage ETF that is focused on the marijuana industry, MSOX. MSOX could be a rock star investment and really push your portfolio higher because a few new states in the U.S. are about to vote on different marijuana laws.

But, contango and just the daily ups and downs of the market will make it very difficult to hold MSOX for long periods of time. (I.E. now until the November elections). But, if you don’t have exposure to the marijuana industry over the coming months, you may miss out on a large move higher as more and more investors blow into these ETFs in anticipation of the November elections.

I would not buy one of the leveraged marijuana ETFs, despite the potential for a few more states to open their doors to the marijuana industry. The main reason is the contango these funds have.

However, I would consider owning one of the marijuana ETFs, but not as a play on the upcoming elections, rather long-term (I.E. 10 plus year holding) because I do believe that over the long run, the marijuana industry will rival the alcohol industry within the next decade or so.

Matt Thalman Contributor
Follow me on Twitter @mthalman5513

Disclosure: This contributor did not hold a position in any investment mentioned above at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from for their opinion.