“Future contracts include buying and selling contracts on a market index while simultaneously selling and buying securities for the portfolio in order to gain fast exposure to a market while minimizing opportunity costs.” I don’t understand how buying / selling future contracts and selling / buying securities at the same time is a valid strategy to minimize my opportunity costs… Could someone explain ?
It takes time to buy the stocks for your portfolio required to replicate the market. Therefore, index futures (being liquid) can help you get that exposure fast. Once you have established your futures position you can (over time) buy and sell for your portfolio, and eventually reverse your futures position (or even let it expire, if the futures are short term).
Think of it as holding your place in the market returns whilst you figure out your precise strategy.