Research from the consulting firm Greenwich Associates indicates that while the use of over-the-counter, dealer traded, structured derivatives has seen a marked decline in recent months, the use of exchange traded standard futures and option contracts has seen the opposite, a rise in their use by institutional investors for a variety of reasons. Perhaps some of the strategies employed by these institutions can help the average retail investor.
Product Usage Overall
According to that same research, many institutions in North America use futures and options as a means to take a position, whether long or short, in the underlying issue or index. Given that, roughly two-thirds use equity derivatives as a functional adjunct to their fundamental investment strategy or philosophy.
Slightly less than two-thirds of institutions use futures and options to execute their opinion on the general direction of the market, sector or individual issues and just under half use exchange traded derivatives to establish more complex strategies.
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