Which of the following is NOT a strategy used in sales and trading?

Which of the following is NOT a strategy used in sales and trading?

• A. Momentum trading
• B. Statistical arbitrage
• C. Long-term holding
• D. Arbitrage

Answer: (C)

Long-term holding is identified as the correct answer because it does not align with the typical objectives of sales and trading activities, which are generally focused on shorter-term strategies to capitalize on market fluctuations and inefficiencies. In a sales and trading context, professionals aim to make quick trades to benefit from price movements, whereas long-term holding involves maintaining investments over a prolonged period, which is more characteristic of investment management strategies rather than sales and trading practices. Momentum trading, statistical arbitrage, and arbitrage, on the other hand, are all strategies that fit within the framework of sales and trading. Momentum trading capitalizes on the persistence of existing price trends, statistical arbitrage utilizes statistical models to identify price discrepancies between related financial instruments, and arbitrage involves exploiting price differences in different markets or forms of an asset to generate profit. These strategies are designed to take advantage of short-term price movements, making them integral to the sales and trading function.

Long-term holding is identified as the correct answer because it does not align with the typical objectives of sales and trading activities, which are generally focused on shorter-term strategies to capitalize on market fluctuations and inefficiencies. In a sales and trading context, professionals aim to make quick trades to benefit from price movements, whereas long-term holding involves maintaining investments over a prolonged period, which is more characteristic of investment management strategies rather than sales and trading practices.

Momentum trading, statistical arbitrage, and arbitrage, on the other hand, are all strategies that fit within the framework of sales and trading. Momentum trading capitalizes on the persistence of existing price trends, statistical arbitrage utilizes statistical models to identify price discrepancies between related financial instruments, and arbitrage involves exploiting price differences in different markets or forms of an asset to generate profit. These strategies are designed to take advantage of short-term price movements, making them integral to the sales and trading function.