What has been the history of any hedge funds that launched with the sole goal of focusing only on options as a trading and investment vehicle, other than of course the Long Term player and the pretty much re-incarnated again Imperial One? As a broad Fund class what is the history?

With or without that being available, what would the astute citizens of this list think are the challenges before anyone wanting to focus on such a strategy getting lured by the theoretical mispricing due to the "retail effect" in a not so old equity options market in a so called third world country? Some sort of a SWOT would help propel thoughts for sure, if you could care.

Other than the alinear payoffs and the "theoretically" infinite gains possible on calls and the theoretically "limited" downside on the puts which ignore comfortably the notions of widely changing leverage without undertaking any additional actions after the initial entry are there any specific risk return attributes that may help a larger investor diversify well in including such a Fund in its overall portfolio?

I know I have been dismissive, or at least sounding such, ab initio of any such advantages. But then, there are so many bright minds out here, that can prove me wrong in a jiffy. Waiting to be cut wide open and get some more education that may be appropriate for a speculator.





Speak your mind

1 Comment so far

  1. Sumit Agrawal on December 6, 2010 3:22 am

    I think one of the edge comes from being a (implicit) liquidity provider in illiquid options one can usually find in many stocks.

    For EM, it continues to be a space where new entrants are needed.

    I am very interested in doing such a kind of thing in India, once I am ready. However one has to be careful about or be able to find ways to get around Short-term trading taxes (which are exorbitant).


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