As long as hedge funds, mutual funds and other investment advisers continue to proliferate, the business will continue to expand.
The trader profits on the short stock if shares drop, while the long calls hedge potential bullish movement in the price of the underlying through expiration in March.
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In July, the SEC subpoenaed documents from NIR Group, the Long Island hedge fund firm run by Corey Ribotsky that specializes in PIPEs, in an investigation focusing on the performance valuations of NIR's family of hedge funds and communications NIR made to investors.
Being a long-only hedge fund without any hedges makes it tough in that environment.
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Not long ago, hedge funds were a small, poorly understood and exclusive segment of financial services.
Currently the WF Asian fund is 43% net long, and although it hasn't been around for long, the hedge seems to be working.
By purchasing calls on the VIX, which rises in periods of market fear or decline, one can hedge long index, ETF, or stock positions.
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The investor responsible for the transaction may be taking an outright bearish stance on the stock, or may be using the position to hedge long stock in DNKN through earnings.
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The higher this ratio is, the more invested hedge fund managers are, as they typically buy puts on these broad-based exchange-traded funds to hedge long equity positions as they accumulate shares.
When hedge fund managers are bullish, they are aggressively purchasing puts on major ETFs to hedge long stock positions but right now, puts are not being purchased at a brisk pace relative to calls, suggesting hedge fund managers are on the sidelines.
Long-time readers know that when this ratio is rising, it has typically been a sign that hedge fund managers are accumulating equities and buying put options on these broad-based ETFs to hedge their long positions.
To hedge its long position in the XRT, Goldman shorted the individual securities underlying the XRT.
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McDonough sparked controversy in 1998 when he assembled 14 banks to bail out the collapsing hedge fund Long-Term Capital Management.
He featured prominently in Goldman's negotiations with fellow investment banks to bail out hedge fund Long-Term Capital Management in 1998.
Alternatively, the trader may be cautiously optimistic on the pharmaceuticals giant, establishing the put spread to hedge a long position in the underlying shares.
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Ten years ago this month, the New York Fed orchestrated the orderly unwinding of hedge fund Long-Term Capital Management, which foundered on exposures to Russian government bonds.
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Then giant hedge fund Long Term Capital Management collapsed due to big bets on Asian currencies, causing problems also for the large banks that had financed it.
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This ratio tends to move higher when fund managers are in equity accumulation mode, as they purchase puts on these broad-based ETFs to hedge their long stock positions.
But Wall Street veteran Dan Strachman, whose books include The Long and Short of Hedge Funds, says a lot of big institutional investors probably invested in it, too.
The investor behind the transaction may be implementing the spread to hedge a long position in ADS shares, or may be establishing an outright bearish stance on the stock.
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This could mean short sellers are using the stock to hedge a long bet elsewhere, or could also mean that short sellers believe the price of the stock will decline.
Managers began to use less internal leverage following the infamous blowup of the Long Term Capital Management hedge fund in 1999, although that has been edging back up in recent years.
Remember when the options-pricing pioneer Robert Merton won the award in 1997 a year before his hedge fund Long Term Capital Management imploded and almost took down the world financial system?
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The investor may be employing the three-way spread to take finance an outright bearish view on the stock, or could be using the trade to hedge a long position in the underlying shares.
In fact, yen-selling has only recently begun to accelerate as global investors finally respond to the nearly catastrophic economic conditions in the Japanese economy and start to modestly hedge their long yen exposures.
Certainly, Tsang's decisions look better after a 13% rise in stock prices since the end of intervention and the near-collapse of U.S. hedge fund Long-Term Capital Management, which shook world markets and sparked a Washington-orchestrated bailout.
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