Australian Investment Blog

Traders / Hedge Funds creating opportunities for investors in FMG & BOQ

One of the things I learned as a proprietary trader for Goldman Sachs (i.e. trading on behalf of the bank itself, not its clients) was that large professional traders (e.g. hedge funds) have one eye fixed on markets/opportunities and one on "VAR" (Value at Risk), hence when they have a view on a stock, they will often take an opposing position in a similar stock so their overall risk to the sector/market is reduced and hence enabling them to have a much larger position in their specific view. This can create excellent opportunities as stocks may be sold to simply reduce a traders risk and not because of significant perceived issues. I feel this is currently unfolding to a certain degree in two areas.