Syracuse Business Daily

what are the strategies for hedging?

Can you list some strategies for hedging

Public Comments

1. You could sell an out of the money index call option. If the index started going up fast (and you are losing money) you buy the index future to hedge. The option is not that prdictable but the future is. It's basically two instruments that move or correlate, together (maybe in the opposite direction) So if one goes down too much and you are afraid you will lose too much money, you buy the one that moves the other way to counteract your loss with a gain. In other examplesit could be a commodity that you have to buy. Let's say you make chocolate bars. You need to buy cocoa as a raw material. You will need more cocoa in 3 months time but think the price might go up by then. So you buy cocoa futures (at todays price) to hedge out the upward movement.