A thought many people have after things don’t go their way: I should have hedged! The key to hedging, unfortunately, is doing so when things ARE going your way. To use a sports analogy, bettors on the side of the Atlanta Falcons in the 2017 Super Bowl preferably would have hedged when they were up 28-3 and their opponent’s, the New England Patriots, odds to win were 11-1.
For active traders and investors, systematic risk is a market driver that should never be ignored. It can come on as a surprise and wreak havoc on even the most well-diversified portfolios. Let’s take a look at how astute market participants address and hedge against this type of risk.
If nothing else, the 2020 coronavirus (COVID-19) pandemic reminded us of the importance of risk management. From late February through the end of April, unprecedented levels of volatility swept the world’s equity, commodity, and currency markets. Traders familiar with the principle of diversification and how to hedge with options protected their wealth and may have… Read more.
According to the International Energy Agency (IEA), global demand for crude oil is expected to increase by 1 million barrels per day until the year 2025. If the IEA’s projections turn out to be accurate, then the supply side of the global energy complex will be placed under immense pressure. Given such a scenario, implementing… Read more.
In the real world, as well as in the markets, managing risk is a critical part of avoiding financial catastrophe. From buying a life insurance policy to diversifying your portfolio, actively addressing risk can save countless dollars and provide peace of mind.
For decades, institutional traders have limited the risk exposure of their portfolios by implementing delta hedging strategies. These methodologies are now gaining popularity among retail traders in the stock, currency, and futures markets.
For investors and producers who participate in the global markets, currency risk is a very real consideration. Currency risk, also known as exchange-rate risk, emerges when foreign currencies unexpectedly appreciate or depreciate against one another. In the event that traditional correlations suddenly become stressed or irrelevant, once sturdy monetary relationships degrade―and currency risk runs rampant.
Producers – Have you ever wondered when you should use futures versus when you should use options? Do you know the optimal times to use one versus the other? Making the right choice can be vital. Make sure you know the difference.
When it comes to managing risk, gold has been a tried-and-true insurance policy for the bulk of human history. For producers, speculators, and buy-and-hold investors, gold is an asset rarely ignored. Perhaps gold’s strongest attribute is its versatility. Aside from being held in the physical form, it is readily tradable via standardized futures and options… Read more.
In the business world, “risk” is often the nastiest four-letter word in the book. As a result, finding effective hedging techniques to protect asset values and profitability is a common pursuit for people in a wide variety of industries. Due to their inherent flexibility, futures products are especially useful for hedging. The applications of futures… Read more.