Things are most dangerous when they appear easy. Carret states “margin debt – stock market debt is terribly dangerous, because it is so easy to get.” We can imagine that taking credit from banks (both funded or unfunded) is so difficult, tedious and arduous process. Raising loan in the market needs just a call to place order with the broker.
When the price of the futures and that of the basket of underlying stocks converged, as they do later when the futures contracts settle, the arbitrageur closes out the hedge and captures the original spread as a profit. Please follow and like us:0
On competition: “I thought back on my running career at Oregon. I’d competed with, and against, men far better, faster, more physically gifted. Many were future Olympians. And yet I’d trained myself to forget this unhappy fact. People reflexively assume that competition is always a good thing, that it always brings out the best in people, […]