The primary use of stock index futures by the portfolio manager is

Question

Quizplus · Accepted Answer

Stock index futures can be used for all three purposes mentioned – to hedge against losses in a declining market, to profit from major market movements, and to increase the profit potential on the portfolio. By buying futures contracts, a portfolio manager can protect against potential losses in the underlying securities or indices while still maintaining exposure to the market. They can also use futures to take a directional bet on market movements, either long or short, for potential profit. Finally, they can use futures to amplify their returns by leveraging their exposure to the market.

The Primary Use of Stock Index Futures by the Portfolio