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Exchange-Traded Funds, Stock Index Futures, and Options

When I was a kid—a runner for Merrill Lynch at 25 dollars a week—I’d heard an old timer say, “The greatest thing to trade would be stock futures—but you can’t do that, it’s gambling.”

—LEO MELAMED, 19881

Warren Buffett thinks that stock futures and options ought to be outlawed, and I agree with him.

—PETER LYNCH, 19892

If someone were to ask what security traded on a stock exchange had the largest dollar volume in the United States in 2012, what would you guess? Apple, Google, Exxon-Mobil? The surprising answer is a security that was not in existence before 1993 and does not even represent a company. The security with the highest dollar volume is spiders, the nickname given to the ...

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