Quote from Maverick74:
They trade pairs so the hedging question is kind of complicated. They basically hedge through diverse selection. In other words, by having 100's of or at least dozens of pairs on so that any one pair does not produce systemic risk along with overall market risk. They don't really just buy FB and sell SPY against it and hold one position. They would be insolvent if they did that. Hell, FB rallied more then 100% while the SPY was up 5% in the same period. You do the math if you were short FB and long SPY.
Why would anyone trade pairs unless had very specific strategy- bright lays this all out nice and neat for the trader ?
I would think if a "trader" is looking for leverage look not further than fut's and options - why bright ?