Supercharge Cannabis Trades with this Options Technique

There's no other way to say it – the legal marijuana industry is booming. And while investors around the world have been riding this wave, many are not leveraging the industry's full potential.

Today, we'll show you exactly how to boost your returns on pot stocks with options.

It's an industry that could easily reach $50 billion in revenue by Jan. 1, 2020, and that is only about six months from today. The growth curve is spectacular. Grand View Research expects the global legal marijuana market to grow to $146 billion by 2025.

State by state, cannabis is enjoying a groundswell of support, even though the federal government has not yet given it the "all clear" with full legalization. But that has not stopped companies from creating therapies based on CBD, the non-psychoactive compound in marijuana and hemp.

CBD, which is short for cannabidiol, works with the body's own systems and receptors. It acts as natural compounds produced in humans, and all mammals, to relieve pain and many other medical conditions. It will be a boon to the fight against opioid addiction and epilepsy.

STAKE YOUR CLAIM: Three pot stocks in particular could be poised for rare, wild gains of up to 1,000%. Click here to learn how you could see a $2 million "pot payday"…

But beyond medical treatments, cannabis is front and center in the wellness industry. From calming lotions to gummies, you can see these products in retail stores already. And it is popping up in unusual places as trendy restaurants drizzle CBD oil on salads.

Both mega-chains CVS Health Corp. (NYSE: CVS) and Walgreens Boots Alliance Inc. (NYSE: WBA) have CBD products on their shelves in selected states. But even that is small potatoes compared to the biggest trend to hit the beverage industry – CBD infused drinks. These include coffee, beer, soda, and others.

The cannabis beverage sector will be one of the fastest-growing segments of the beverage and food industries. According to Grand View Research, the nonalcoholic beverage industry will hit $1.6 trillion by 2025.

Meanwhile, the edibles market – which includes cannabis-infused beverages and foods – will likely hit $4.1 billion in Canada and the United States by 2022.

While that is just a drop in the bucket for the total nonalcoholic market, it's an incredible sum considering the industry barely existed a few years ago.

Picking the Right Pot Stocks and Supercharging Your Returns

As with any industry, there will be winners and losers. While getting the sector – cannabis – right gets you halfway there, you still need to drill down to the company level to find the best of the best. Throwing darts at the stock listings only works in the movies.

Money Morning Options Trading Specialist Tom Gentile can help. Using his proprietary screening tools, he identified several top-rated pot stocks that also show signs that they are ready to explode higher.

We'll focus on one of them and show you how you can easily double and triple your possible gains.

Our favorite, based on Tom's screenings and other factors on the chart, is Connecticut-based Cara Therapeutics Inc. (NASDAQ: CARA). This company is not exclusively a cannabis researcher, but its primary studies are quite related. Its pipeline includes a kappa opioid receptor agonist (KORA). However, it is also working on a cannabinoid-based drug to treat chronic pain.

When you think about it, documented overdose-related deaths from marijuana are almost, if not completely, non-existent. Compare that to the crisis-level of fatalities with opioid overdose. It is clear that there will be a huge market for Cara's product.

You can buy shares of Cara and simply ride its success higher. Or you can take the reins of your investment for even bigger gains.

Supercharge Your Returns with Options

There are many ways to enhance returns with options because of the leverage they provide. The cost to buy an options contract can be only a fraction of what it takes to buy 100 shares of the underlying stock.

For example, Cara Therapeutics closed Thursday at $20.07 per share. That means 100 shares would cost you $2,007 before commissions. And if the stock gets back to last year's closing high of $23.95, you will make a nice profit of 19.3%.

However, a call option, which gives you the right, but not the obligation, to buy 100 shares of stock at a fixed price by a certain date, could cost a tenth of that amount.

For example, the call option with a $20 strike price, or exercise price, expiring August 18, 2019, closed Thursday at $2.50, or $250 per contract that controls 100 shares of CARA stock. If CARA trades at last year's high of $23.95 at the August expiration date, the option would be worth $3.95, or $395 per contract. That's a gain of 58%.

But you don't have to stop there. You can roll your trade over in August and do it again.

In this way, you profit from a rising stock with less money at risk and higher potential percentage profits.

America's Green Gold Rush Is Just Getting Started – Claim Your Stake Now

At this very moment, big investment firms and members of the Fortune 500 are building enormous war chests.

They're preparing to push billions upon billions of dollars into the cannabis market – and they could strike at any moment. So right here – right now – you have a once-in-a-lifetime opportunity to beat them to the punch and stake your claim.

Click here to learn how.

This article is supplied courtesy of Money Morning.

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