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Strategies & Market Trends : Value Investing
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To: Arthur Radley who wrote (35109)8/14/2009 3:11:14 PM
From: MCsweet1 Recommendation  Read Replies (3) of 78740
 
Hedge examples:

Own a convertible that converts into a stock and being short the stock. Recently, you could have shorted citigroup stock and bought the preferred tendered into stock for a nice spread.

You are correct. Margin is dangerous, and problems can arise even with seemingly accurate hedges. However, I expect most hedge funds that blew up were not hedging properly or were using way too much margin.

MC
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