Hedging

[NitroZ7]

I was bored today and was watching some programs on what CME offers to institutional investors. The complexity of some of these positions is crazy. Holding S&P long, having futures contracts as a hedge, and options contracts out at the same time. It is crazy the complexity they go through to try and achieve steady returns (and I am talking hedge funds and insurance companies). Anybody have any first hand experience dealing in these complex structures? I would never deal with it but just curious from an academic perspective. It makes me think sometimes that what we see in the futures market on a given day is only a small piece of what lies behind the scenes.

[boneil]

If you can time the market well, hedging with puts or shorting with futures it would be much better than selling your positions. The problem comes with carrying costs and timing. I have wondered how often the big investors do the hedging without losing a ton of money.