An investor would like to use tactical asset allocation to take advantage of short-term mispricing. Which of the following statements is most accurate regarding the use of either ETFs or equity index futures combined with baskets trades? A) | If she uses futures, she will be able to invest longer-term and establish short positions more easily. |
| B) | If she uses ETFs, she will be able to invest longer-term but will not be able to establish short positions as easily. |
| C) | If she uses ETFs, she will be able to establish short positions more easily but not long-term positions. |
| D) | If she uses ETFs, she will be able to invest longer-term and establish short positions more easily. |
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Answer and Explanation
Equity futures contracts have a finite life and must be periodically rolled over into a new contract whereas ETFs have a theoretically infinite life. Using basket trades and futures contracts to establish short positions may be problematic because a basket may not be shorted if one of the components violates the uptick rule. The uptick rule states that a security may not be shorted if the last price movement was a decline. ETFs are not usually subject to the uptick rule.
[此贴子已经被作者于2008-9-18 17:20:00编辑过] |