Hedge Fund Managers Trade Just About Anything

There’s an old story about a top trader who was so competitive, he would bet on whether an ant would cross a crack in the sidewalk. So it should come as no surprise that if anything has any effect on business or making money, it can be traded, as Investopedia recently pointed out in an article titled, “6 Weird Futures You Can Trade.”

Traders have long been able to bet on the direction of corn, soybeans, pork bellies, oil and other commodities. Now the “canvas” for creative traders is growing even larger. As long as two parties can agree to take both sides of a trade, the bet is on.

Some of the more arcane trades include: Freight Derivatives – betting whether the price of transporting something from one region to another will be higher or lower in the future. Movies: pending approval from the Commodity Futures Trading Commission (CFTC), you’ll soon you’ll be able to buy and sell futures on how much money a movie will make during its first month in theaters.

You can even bet on the weather which, after all, can have a major impact on some industries such as agriculture and construction. You can trade Weather Derivatives which bet on a range of average temperatures over time, packaged into a trade. Or place bets on how many hurricanes will crash into the shoreline in the coming season, something that might be a useful hedge for insurance companies and oil producers.

These are not small markets, either. Investopedia points out that tens of billions of dollars trade hands in these futures annually. It serves as a good reminder that our financial markets are always innovating.

What’s your opinion? Do you think financial professionals are too creative? What’s the weirdest trade you’ve ever been involved with? Add your comments below.

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{ 1 comment }

Kaufman April 10, 2010 at 4:16 am

I had earlier traded plastics with futures contracts. To play my game safe, I study for a month i.e. NYMEX (New York Mercantile Exchange) and the main players exchanges, speculators, hedgers and the regulators.

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