By investing in a pool of companies, and managing the risk carefully, VCs have been able to be relatively successful with this strategy.
However, in recognition of the difficulty in picking winners, VCs will seek to invest only in companies with very low “perceived risk to the knowledgeable investor”, as a continuing attempt to improve their odds.
In fact, for that reason, these strategies are also sometimes referred to as relative value strategies in the buy-side sector.
Now that we have gone through what a spread trade entails, we can explore the types of spread trades.
Spread trading using futures is relatively straightforward and involves simultaneously buying a particular contract and selling a contract against it.
The club shall be called:- THE HEREFORDSHIRE MODEL AERO CLUB 2.
The Club shall be affiliated to the British Model Flying Association (The Society of Model Aeronautical Engineers Ltd.) 3.
Every futures spread trade clearly has the features of a hedging transaction that alters the exposure for a trader from that of outright price fluctuations to the price differentials between the legs of the spread trade.
In other words, the profitability of a futures spread strategy will depend of the price direction or, for that matter, the differences in the pace of price movement for the individual legs of the strategy.