What is cash neutral?

Cash Neutral is a type of strategy that includes the creation of a set of purchase and sale of financial instruments to a combination that leads to any real increase or decline for the investor. This approach does not include any net cash, which means that the investor's liquid assets are not tied at this time. Cash cash strategy may sometimes be useful in recovery of assets, especially in hedges, in a way that will build the investor's share for a better advantage and prepare a way to get a return in the future.

One of the more common configurations of cash neutral agreement is to pair the purchase of a new short asset asset for asset, which is already owned by the investor. The aim is to ensure that the combination results in a neutral situation in terms of impact on the portfolio. While the investor loses money by short selling one asset, the plan is to think of the difference in obtaining another asset that he assumes that he will generate revenues that compensate this loss from short sales.

With the use of cash neutral strategy, several potential benefits are linked, including the advantage that you do not have to dive into other assets to manage the purchase of a new asset. It is not necessary to use clean cash or to use the Margic account to manage the purchase by making and selling at the same time. This means that other investor assets remain in place and transactions are not affected in any way.

There are some potential disadvantages for a neutral cash strategy. If the acquired asset does not generate returns to balance the impact of short sales, it will eventually start a net loss. At the same time, if the idea was to interpret a hedge fund or a similar investment that was expected to lose value in the near future short sales can be more convenient compared to the greater losses that would be realized if the asset was held. Before the investors really be forThey associate into a neutral strategy of monetary neutral strategies, take the time to screen all possible results, consider the risk associated with the activity, and then make a decision to continue or not.