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You now feel confident you can make a lot of profits from trading option strategies. However,...

You now feel confident you can make a lot of profits from trading option strategies. However, you need a substantial amount of money so that the transaction costs are negligible. You plan on asking people you know to pool their money together. What kind of investment company would be the most suitable for this purpose: a Mutual Fund or a Hedge Fund ? Explain.

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Answer #1

Hedge fund is a company which is more focused towards management of different strategies through different markets in order to maximize the return from minimising risk and it invest its assets into offshore funds as well so I will go for hedge fund.

Mutual funds are known for investing into various kinds of asset classes and their only focus on to make returns out of managing people's money by investing it.

I will opt for Hedge fund as I have to trade through derivatives and since transaction costs are minimal in in hedge funds, it would be an appropriate choice.

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