
loss, it is still worth £56 250. The speculator, therefore, wants to
assume risk for potentially much higher rewards.
The reason why the fund manager might buy options, or futures, is
to gain an immediate exposure to the market. Having achieved this
the fund manager can now actually take the exposure in the relevant
stock or bonds or currencies by buying the underlying and then
simultaneously closing out the derivatives. The big advantage is par-
ticipation in any immediate market move, but also if the anticipated
move does not happen the fund manager can easily and quickly close
out the derivative positions and whilst