Waiting On The Futures
- Topics:
- Commercial Lending
- Source:
- Thomson
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Overview: Single-stock futures will offer managers the opportunity to increase their leverage, but the downside is the possibility of more risk. Once they finally start trading, single-stock futures are bound to have an impact on the markets, and speculation continues as to how they might affect investment managers and, specifically, how they might affect hedge funds. Perhaps the most important outcome for hedge fund managers, in particular the ones using arbitrage strategies, is that the very nature of single-stock futures implies that volatility will go up. A large futures buyer could cause a stock to temporarily spike higher. This would happen because the seller at the exchange is not immediately matched to the buyer in the futures. Additionally, as a cheaper source of financing, single-stock futures allow both hedge fund and conventional managers the opportunity to increase their leverage and effectively enhance their returns.
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Format: HTML | Date: Apr 2002 | Pages: 1
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