Hedge funds are also called leveraged funds because the high leverage of the investment effect is the main feature of hedge funds. Typical hedge funds often use bank credit to expand investment funds several times or even dozens of times based on their original fund amount with extremely high leverage, so as to achieve the purpose of maximizing returns. The high liquidity of hedge funds' securities assets allows hedge funds to easily use fund assets to make mortgage loans. A hedge fund with only $100 million in capital can lend billions of dollars by repeatedly pledging its securities. The existence of this leverage effect makes the net profit after deducting loan interest after a transaction far greater than the possible income from operating with only US$100 million in capital. Similarly, precisely because of the leverage effect, hedge funds often face huge risks of excessive losses when operating improperly.

Hedge Fund (also known as hedge fund or arbitrage fund) means "risk-hedged fund". In a most basic hedging operation. After purchasing a stock, the fund manager also purchases a put option (Put Option) with a certain price and expiration date on the stock. The utility of a put option is that when the stock price falls below the price specified by the option, the holder of the put option can sell the stock he holds at the price specified by the option, thereby hedging the risk of the stock falling in price. For example, when a fund manager buys a stock at a price of 3 yuan per share, he also purchases a put option on the stock. Assume that the option exercise price is 2.7 yuan per share. Then on the expiration date, if the price of the stock rises, the fund manager can choose not to execute the option, but sell the stock at a market price higher than 3 yuan at that time, and reap capital gains. If the stock price falls below the execution price (2.7 yuan per share) on the expiration date, the fund manager can choose to execute the option and sell the shares held at a price of 2.7 yuan per share. In other words, the fund manager can control the loss per share to within 0.3 yuan through hedging operations.

In another type of hedging operation, the fund manager first selects a certain industry with bullish market conditions, buys several high-quality stocks that are promising in the industry, and at the same time sells relatively high-quality stocks in the industry at a certain ratio. A few poor quality stocks. The result of such a combination is that if the industry is expected to perform well, high-quality stocks will rise more than other stocks in the same industry, and the income from buying high-quality stocks will be greater than the loss from short-selling low-quality stocks; if the expectations are wrong, stocks in this industry will not rise. If it falls back, then the stocks of poor companies will fall more than those of high-quality stocks. Then the profit from short selling must be higher than the loss caused by the decline in buying high-quality stocks. Because of such operating methods, early hedge funds can be said to be a form of fund management based on conservative investment strategies of risk aversion and value preservation.

If you plan to buy symmetric funds, the Jiatai Emerging Capital Absolute Return Fund currently on the market is worth paying attention to. This fund uses tools such as short positions and stock index futures to hedge market risks and achieve low-risk wealth preservation and appreciation amid market fluctuations.