Derivatives and funds aren’t ordinarily grouped together, yet they both represent indirect ownership of money market securities, notes, bonds, stocks, commodities, real estate, and other assets. Owning a derivative contract differs from having an asset in your possession. Buying shares of a fund isn’t the same as having direct control of its holdings.
The connections run deeper. Funds can own derivatives, government and corporate securities, or hard assets. Derivatives are available on shares of funds, especially those that track the Standard & Poor’s 500 Index, the Dow Jones Industrial Average, and other benchmarks.
Risk is another ...