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South Africa: JSE Investment Challenge 2021 – Students Up Their Risk Game and Tap Into Derivatives

As the year progresses, competition in the JSE Investment Challenge is becoming more heated as teams are knocked out from their previous positions and others take their place. This month, we take a look at some of the intricacies of investing in the speculator category, which is the riskiest category in the competition.

The teams that choose to participate in the speculator category do not have to maintain any cash component, can trade up to 10% in a company and can invest in all 331 shares listed on the JSE. Investors in this category are allowed to take on more risk and also invest via derivatives which are typically higher-risk investments (both in the challenge and when investing in real life).

Langa Manqele, the head of equity and equities derivatives at the JSE, explains that in the real market, single stock futures would typically be used by brokers, fund managers or speculators who want to use a geared instrument to make profit from a share increasing or falling. “In a hedge fund, run by a fund manager or asset manager, for example, an instrument such as single stock futures would be used to ‘hedge’ the fund’s position to reduce the…