What is "hedge fund"

Source: http://news.xinhuanet.com/stock/2004-11/11/content_2204606.htm
The English name of a hedge fund is hedge fund, which means "hedge funds with risks". It originated in the United States in early 1950s. Its operation aims to use futures, options, and other financial derivative products, as well as the related operation skills for real-time selling and risk hedging of different stocks, to a certain extent, it can avoid and resolve investment risks.

In the most basic hedging operation, a fund manager buys a put option at a certain price and validity period after buying a stock ). The utility of a put option is that when the stock price falls below the price limited by the option, the seller's option holder can sell the stock held in his hand at the price limited by the option, in this way, the risk of stock price falls is hedge. In another type of hedging operation, the fund manager first selects an industry with a Bullish market, buys several high-quality stocks in the industry, and sells several inferior stocks in the industry at a certain rate. The result of such a combination is that, if the industry is expected to perform well, the growth of quality stocks will exceed those of other stocks in the same industry, and the benefits of buying quality stocks will be greater than the loss of selling poor stocks; if the expectation is wrong, in this industry, stock passes do not rise or fall, so the decline of poor companies will be greater than the decline of high-quality stocks, then the profit of the Short Selling port will be higher than the loss caused by the fall of the purchase of high-quality stocks (blogger note: for example, if there are two low-quality stocks A and B, and A is buying 100 yuan, B is selling 30 yuan, and each has three shares, then in the case of "no ups and downs, we can assume that a has fallen 5 yuan and B has fallen 10 yuan (because B is a poor-performing stock and has fallen more than a). So let's take a look, we sold 3 Shares of B and got 30 yuan, while a fell 5 yuan, 3 Shares totaled 15 yuan, 30-15 = 15, the result is calculated, we earned 15 RMB ). Because of this operation, early hedge funds can be said to be a form of Fund Management Based on hedging conservative investment strategies.

After decades of evolution, hedge funds have lost their initial risk hedging connotation and have become synonymous with a new investment model. That is, based on the latest investment theory and complex financial market operation skills, we make full use of the leverage utility of various financial derivatives to undertake high-risk and high-income investment models.