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ACCURATE THINKING EQUALS POSITIVE RESULTS A hedge strategy originated with the futures markets. It is constructed by first defining the risk and objectives associated with a company's cash market needs. Futures and options are then used to stabilize or reduce price risk associated with the strategy. Futures originated ONLY to hedge price risk of the underlying asset. Success is quantified by integrating the composite results of both the futures/options and cash market positions. This is the original and only economic purpose of futures and options. Managed Futures and Options are a by-product or indirect application emanating from the fundamental purpose of the markets, which is to offset cash market risk. Stocks and bonds are instruments used to raise capital for company growth. Again without fundamental economic need, both would be non existent. Mutual funds and other traditional investments also exist only as by-products. Primary markets were not established so people can speculate. Without a fundamental economic need markets would be non-existent. Any financial instrument founded upon a basic need for economic stability has evolved into an investment with potential to produce a similar form of stability for investors. Managed Futures and Option strategies parallel a path of tradition and hold their place of honor within a spectrum of investments. We believe anything less than an 'integrated' approach to managed futures is speculation, rather than healthy management of risk. We suggest that you recognize the difference before approaching these markets. Jeffrey Pearl / Founder
Further education can be located from www.sanctity.com / Monthly Articles and www.sanctity.com / Financial Library |
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