When you buy a Cannabis Lot option, you’re buying the right to purchase shares in cannabis companies – in the future – at a set price.
That means you’re buying the right to control shares of the company – without ever actually buying a single one.
This is also known as buying a “call option.”
You buy call options when you think a company’s share price will go up in the future.
Think of it like renting a house – but in this case, that house is a stock.
You have the right to live in the house until your lease expires, but you never actually own the house.
Options work the same way…
- You are buying the right to “rent” a stock you don’t own.
- You have the right to control the stock until the option expires… just like a lease.
- And just like a lease, you decide how much you’re willing to pay in “rent” right up front.
And when trading options, sometimes you don’t have to wait for even a week to capture the kind of profits it takes investors decades to make on stocks.
That’s what makes options so special.
Here’s an example.
Say you want to buy a Cannabis Lot – an option – on a big company like Canopy Growth Corporation (NYSE:CGC) because you think the stock is going to climb in price.
Now each option has its own unique identification “code” – known as an options chain.
During the trading day, you’ll see that the options prices on the chain change from moment to moment.
So, who decides what the prices are?
The short answer is: the market.