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Comment by JumpCrisscross | Hacker News Reader

> professionals make most of their money from non-linear derivatives (or make their own)

Source? (It’s not true for common definitions of those words.)

Most hedge funds won’t touch options for the reasons I mentioned. They’re a hedging tool. (They will happily use swaps and other leveraged instruments. But those are linear.)

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Source my friend? I worked in hedge funds for almost two decades. All of them touched options plenty. There is a big difference between using options to get a particular risk/reward exposure you want and clueless retail chasing some meme short squeeze nonsense which has the expected value of a drunk newbie sitting down at a Vegas poker table.

> big difference between using options to get a particular risk/reward exposure

Sorry, it was my turn to be imprecise.

Most hedge funds aren’t taking exposure through options but managing risk with them. Most asset managers never touch options. Most professional money managers (institutional; I’m not counting FAs) are not at hedge funds.

All true.

I can tell you with great certainty that at least some of the biggest institutions that are legally hedge funds do use options. And I consider highly leveraged derivatives to be non linear (because they are on the downside), which may be an abuse of common parlance.

It's going to be fairly difficult to give a source, though.

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