Description
COMBINING COSTS AND BENEFITS
If this sounds as if there are many moving parts involved in calculating the interest-rate
savings of SSFs, there are. That is unavoidable in this situation, but then again, it is
unavoidable in all forms of arbitrage. Fortunately, there are interactive online calculators
available to walk you through the process. (Check out OneChicagoCalculator.com.)
This is if you are an arbitrageur.
If you are simply an investor looking to maximize the return on your capital, the first thing you want to do is get comfortable with the whole process: No one trades what they do not understand, or alternatively, what they think they do not understand. How many stock traders can tell you the interest-rate opportunity costs associated with their investments? Most of us do not know because we were never told we should care. You should; it is real money and adds up quickly. Professional traders, including dedicated short sellers, market-neutral funds and so-called 130/30 funds (those that balance a 130 percent long position with a 30 percent short position) have started to come back to SSFs because they understand the importance of return on capital. It is, after all, the only game in town. http://www.sfomag.com/article.aspx?ID=1306&issueID=c Howard L.
Simons is president of Simons Research, which provides economic and financial analyses and commodity trading advisories for firms, traders and exchanges. He can be reached at hsimons@aol.com. .
If you are simply an investor looking to maximize the return on your capital, the first thing you want to do is get comfortable with the whole process: No one trades what they do not understand, or alternatively, what they think they do not understand. How many stock traders can tell you the interest-rate opportunity costs associated with their investments? Most of us do not know because we were never told we should care. You should; it is real money and adds up quickly. Professional traders, including dedicated short sellers, market-neutral funds and so-called 130/30 funds (those that balance a 130 percent long position with a 30 percent short position) have started to come back to SSFs because they understand the importance of return on capital. It is, after all, the only game in town. http://www.sfomag.com/article.aspx?ID=1306&issueID=c Howard L.
Simons is president of Simons Research, which provides economic and financial analyses and commodity trading advisories for firms, traders and exchanges. He can be reached at hsimons@aol.com. .
