View Full Version : Hedging Pice Risk
08-13-2000, 12:24 AM
With Fuel and Oil Prices know coming back to earth. It is time to think about a Hedging Strategy to combat a massive rise once again in any retail Fuel & Oil Price. Although some of Q2's profits declined because of the increase in Fuel and Oil I am willing take positions in the gasoline and oil futures Markets to paricially hedge my business risk.
Do Any of You Hedge Business Risk?
What Risk Do you Hedge, What Contracts Do you use, How often and how long(duration) do you keep the contract open?
Has anyone used temperature Futures?
08-13-2000, 11:33 AM
You sure you think this is necessary? Hedging is a smart strategy is some situations, but how familiar are you with the futures market. You should be asking this question to a financial advisor.
Hedging is used by large corporations who need to stabilize the flucuations of prices from their key suppliers in order to make accurate projections of future cash flow. Although gas expenditures are a significant cost of business, did the increase this year cause you to risk bancrupcy. Were you paying bills a little slower because of it, or were you just not profiting as much as you would have liked.
Don't forget that if prices drop down to their original levels, you would be kicking yourself! So only do it if you absolutely need that level of stability.
I think a better bet would be to hedge against drought!!! Does your region have any crops that have major influence over the Chicago Board of Trade (CBOT) prices? If so, sell short those crops! That's far more important protection! Of course I'm joking - don't acutally do this!
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