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/biz/ - Business & Finance

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1278419 No.1278419 [Reply] [Original]

Am I correct that buying bull and bear certificates are basically just betting against the person selling the certificate? I mean, if I buy a bull certificate and the underlying asset is the S&P 500, is that essentially the same thing as me saying to a friend "Hey, I bet you x amount of dollars the S&P is gonna go up"?

Can someone explain this?

>> No.1278433

>>1278419
First, a question:

What the fuck is a bull certificate?
Most anons here are not proficient in cattle futures.

>> No.1278477

Yes, your understanding is correct. You own nothing, and have 100% counterparty risk.

They're an excellent instrument though.

>> No.1279998

>>1278477
Doesnt the institution selling the certificate also carry risk? I mean if my bet is right then they have to pay me, right?

>> No.1280002

>>1278433
Maybe he's buying a call? That's a bullish certificate.. Sort of

>> No.1280021

>>1280002
>bull certificate
Sounds like it's just a CD tied to index performance, rather than a fixed interest rate.
On it's face, it looks like limited downside (there's a minimum rate paid) with significant possibility for upward movement.
However, I would bet the minimum rate is garbage.
It almost has to be.