Visit our COVID-19 site for latest information regarding how we can support you. For up to date information about the pandemic visit www.sacoronavirus.co.za.

bs-regular
bs-extra-light
bs-light
bs-light
bs-cond-light-webfont
bs-medium
bs-bold
bs-black

Community


Share knowledge. Ask questions. Find answers.

Online Share Trading

Engage and learn about markets and trading online

derivative fund

Reply
nala
Super Contributor
i have got a friend who wants to start a derivative fund- he has got CFA and is in the process of getting his FSB licence What are the things i should ask and look out for if i want to invest with him?
0 Kudos
11 REPLIES 11
Maddog
Regular Contributor
Is he prepared to cover your losses 100% for the first year????
0 Kudos
Not applicable
Nala ur friend prob bought a charting program and made some money on his first trade and now he thinks he is the best trader on the block - deriv products are weapons of mass destruction as Warren Buffet warned us - by a lot of prozac before u take the kids ters money.
0 Kudos
john_1
Super Contributor
Buffet is the biggest player in the opption market in the US or at least he was a couple of months back..I you going to preach ..practice
0 Kudos
Werner_1
Super Contributor
I think it depends what one does with derivatives, e.g. Buffett possibly wrote options himself, using them as protection on his positions, etc, if done correction can be very useful. e.g. JPMorgan is the inventor of Credit Default Swaps, but really didnt get that burnt with them like their competitors did, this is because they know what they created them for and how to use them... so i guess it depends what the strategy of the fund is. If its straight forward speculation it could be dangerous...
0 Kudos
john_1
Super Contributor
point taken..but that does noy explain the "mass distruction'
0 Kudos
SimonPB
Valued Contributor
most of his WMD are in the insurance bus .. who always use them .. he also bought a bunch of miss priced options, which you then hedge out and hold until expiry for a profit ..
0 Kudos
john_1
Super Contributor
sure but you have to be watching to see the mispriced...
0 Kudos
SimonPB
Valued Contributor
sure, but seeing as his insurnace arm actively trade in WMD .. they are surely watching ??
0 Kudos
SimonPB
Valued Contributor
an of course you can get excel to watch for you, and then send an SMS when you hit jackpot ..
0 Kudos
john_1
Super Contributor
my point is he uses them---big time. I don't mind in fact anybody who understands the market like him should...
0 Kudos
Not applicable
I would start by asking to have a look at his track record to see if he can trade well and consistantly. I would then ask him what his profit objectives are to decide how much risk your capital will be subjected to and consequently how much to invest (if anything at all)
0 Kudos