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Questions tagged [hedging]

for questions that relate to hedging. A hedge is an investment position intended to offset potential losses/gains.

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Do market makers do gamma hedging on option futures ES?

Do market makers do gamma hedging on these too, or is the ES price only impacted by gamma hedging on SPX and SPY according to volumes?
yassir mimouna's user avatar
1 vote
1 answer
43 views

Hedging Using Forward Contracts example from Hull's book

I am trying to learn futures and options from John Hull's book Fundamentals of Futures and Options Markets 9ed. In section 1.8, he has given an example of hedging using forward contracts. Following ...
user9026's user avatar
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2 answers
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Hedging with options

Online when I see people talk about using options to hedge, they always seem to talk about it in the put options sense. For example you buy a stock expecting it go up, but then just to be safe you buy ...
j jose's user avatar
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0 answers
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One-touch call option under Black-Scholes model

I know that a european call option can be valuated using the Black-Scholes formula, that is; $C_t(K)=BS(S_0,t,T,K,r)$, so if I have a one-touch call option given as \begin{equation} OTC_T(K)=(S_T-K)^+\...
Don P.'s user avatar
  • 101
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1 answer
286 views

How to properly hedge indices futures NQ by selling leveraged index options TQQQ or SQQQ?

Is there a formal futures NQ vs TQQQ options contracts hedging ratio calculation/strategy to tap on the fast decaying value of weekly expiry TQQQ options thereby creating an asymmetric risk-reward ...
surewin's user avatar
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1 answer
125 views

Is it worth it to diversify the "risk-free" portion of a portfolio across multiple assets?

I am looking into the constructing of my own sort of "structured product" and have been thinking about the risk profiles of the "risk-free" portion of products like this. Generally,...
QMath's user avatar
  • 103
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2 answers
123 views

On the meaning of Delta hedging

Basically, I'd really like to give a natural interpretation of as prescribed by the Black-Scholes model for European derivatives, where O(t) is the option price and S(t) is the price of the ...
ric.san's user avatar
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0 answers
70 views

What is the best way to manage my savings and possibly increase my cash flow despite inflation in Egypt?

With the very quickly rising prices in Egypt, What is the best way to manage my savings and possibly increase my cash flow? I’ve also got some ideas, Are they good or not? Ideas that I have: Work as ...
Ahmed Eissa's user avatar
1 vote
0 answers
131 views

Why are CHF-hedged S&P500 ETFs performing much worse?

I would like to understand why in the following chart, the CHF-hedged ETF tracking the S&P500 is performing so much worse than the one tracking the S&P 500 in USD: blue: ETF ISH CORE S&...
rethab's user avatar
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1 answer
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Forward vs Future rates

Looking at the market data for USD/CHF on investing.com and can't get my head around the difference between the forward and futures rates for this pair. USD/CHF spot rate is 0.9898 MAR23 Futures ...
Vitaly Samara's user avatar
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1 answer
247 views

How to calculate break even price on delta hedged portfolio?

The underlying currently trades at 10. Suppose you have a portfolio consisting of: 1 Call at strike 11 with premium 0.4 A short position of 25 shares Calculate the break even prices of this ...
eagerAnna's user avatar
1 vote
0 answers
72 views

What is the unhedged version of VBU?

I know I should be able to find this, but I don’t see it listed anywhere online. I want to find the Canadian version of Vanguard’s total US Bond index (BND), I see VBU but this is hedged against the ...
Dugan 's user avatar
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1 vote
1 answer
167 views

What does it mean to "hedge USD back to CHF"?

I earn in CHF, so I'm considering the iShares S&P 500 CHF Hedged ETF as a way of investing in the S&P 500 while also protecting myself against fluctuations in the USD/CHF exchange rate since ...
Nathanos's user avatar
0 votes
1 answer
82 views

Delta hedging of stock portfolio using options

In the aforesaid delta hedging of stock position, how was the delta of long stock computed by author ? In my opinion, total long position of 500 shares divided by the market lot of one put option ...
Win_odd Dhamnekar's user avatar
1 vote
1 answer
218 views

How Do I Construct a Long Short Portfolio Using Only Options?

I'm confused on how to construct a long short portfolio using strictly options. If I wanted to hedge stock, I would long stock A and short stock B by making sure that the quantity * price of A = ...
Bob Marshall's user avatar
2 votes
1 answer
99 views

Hedging a portfolio by shorting index - Margin calculations

I wish to run a long-only portfolio of stocks and hedge it during turbulent times by shorting a correlated index. I'd rather short an index ETF for hedging instead of flattening my position. My ...
maverik's user avatar
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1 answer
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(Stock)/Option Positions

I'm studying for my SIE, and I have a question along the lines of Difference between naked put, covered put, protective put. Can someone help me fill in my "??"'s? "Long (stock)/Long ...
Jeffrey Rolland's user avatar
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2 answers
118 views

Protective put became ITM before expiration. How to prevent option exercise?

Options beginner here. I have a protective put on a stock and it became ITM 2 days before expiration. I do not want the option to be exercised, since I’m bullish on the stock, and want to continue ...
krish47's user avatar
1 vote
2 answers
108 views

How are borrowings in local currency used to hedge foreign exchange exposure on investments?

The following appears in Jardine Matheson's 2020 annual report's Financial Review section: Treasury Policy The Group manages its exposure to financial risk using a variety of techniques and ...
Flux's user avatar
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1 answer
208 views

Are there good ways to hedge against a combination of high inflation & rising rates?

I have saved some money that I would like to use in the next 1-3 years to start a company. In the meantime I would like to make sure that inflation does not eat up into my accumulated capital. I am ...
David Karam's user avatar
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0 answers
30 views

Benefits for option dealer delta-hedging an inter-dealer OTC equity option

What benefit(s) is (are) attained by options dealers in bilaterally exchanging the cash for shares to delta-hedge an inter-dealer OTC equity option they are trading?
gemini's user avatar
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2 votes
2 answers
360 views

Can a buy order be skipped when price rises rapidly?

I would like to know, if it is possible or likely, that an "out the money" share buy order would be skipped, when a stock prise rises very rapidly. Context: I have 466 shares of tesla. I ...
user1721135's user avatar
36 votes
12 answers
8k views

Hedging vs just betting less

This is a question from a layperson about the fundamental concept of hedging, with regards to investing, gambling, and any situation in which hedging is used to manage risk. I do not understand why ...
David Kennell's user avatar
0 votes
1 answer
124 views

How to hedge/protect my stocks that do not have an option chain?

I've recently invested in a couple of OTC stocks (1st time exploring the OTC market) and unfortunately there's no option chain available. Question is, how can I protect those stocks in particular from ...
Jason A's user avatar
0 votes
2 answers
318 views

Can I hedge on a long position of less than 100 shares and if not is there an alternative strategy?

Good Afternoon All, Quite frankly I'm stumped. I am aware of a covered position under normal circumstances, however in this particular situation there are less than 100 shares and I'd really like to ...
Jason A's user avatar
3 votes
3 answers
71 views

Do taxes on hedging apply between a tax sheltered and non-sheltered account?

I have been reading that there are various tax laws that prevent one from doing things like locking in one's short term gains on a stock by purchasing (or selling) options, or resetting one's cost ...
user avatar
3 votes
1 answer
63 views

Protect "Riesterrente"-retirement account from downside of liquidation

My mom has a german retirement portfolio called "Riester-Rente". Portfolio is mix of bonds and an international fund (DE0008491051). Long explanation: As part of legal compliance, they need ...
Tearsdontfalls's user avatar
2 votes
1 answer
173 views

Is this "forex protection" strategy sane?

Background: I started playing with the stock market in April-May, drawn by the huge rebound. Since then, I have made what I think is a decent return, except... I live in the EU, and most of the ...
Makotanist's user avatar
0 votes
0 answers
51 views

Hedging warrants & cashless exercise

For a given SPAC where the strike on the warrants is 11.50 and each warrant translates to 1 common share, if the company opts for cashless exercise and announces it will deliver 0.37 shares for each ...
Air's user avatar
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-1 votes
2 answers
115 views

How to get fiat liquidity on BTC assets

I am bullish on BTC and at the same time I need some fiat liquidity right now. Is there some combination of financial products I can use? As an example: I have 10 BTC (assume current FX $10,000) I ...
crinv's user avatar
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19 votes
7 answers
5k views

Can I hedge my household expenses using the financial markets?

Apparently farmers can hedge against high raw material prices and low crop prices by using financial instruments such as forwards and futures. Can I use financial instruments to similarly hedge my ...
Flux's user avatar
  • 17.1k
1 vote
2 answers
112 views

When commodity prices rise, do commodity production companies produce lower returns than the commodities?

Suppose I alone know that the price of a commodity will double next month, and will then stay at that level for years. There are two simple ways I could exploit this knowledge: Buy the physical ...
Flux's user avatar
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6 votes
3 answers
2k views

How do I replicate a shorted stock and protective call option using options only?

Suppose a stock is currently at $100. I construct the following portfolio: Short-sell 100 shares at $100 Long a call option — strike price: $105 (protective call) The protective call option serves ...
Flux's user avatar
  • 17.1k
0 votes
1 answer
246 views

Stock portfolio currency hedging

I have a EUR cash account with Interactive Brokers and I trade US stocks. So I converted my euro’s for dollars. But now when my US /dollar stock portfolio is up but eur/usd is down it is hurting my ...
Rick's user avatar
  • 1
1 vote
1 answer
130 views

How would I actually use options (or ??) to hedge a currency?

I've never used hedging instruments to do anything other than day trade! :O Say today I am in the US and I literally borrow AUD $100,000 from a friend in Australia. She wires it along and I convert ...
Fattie's user avatar
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0 votes
1 answer
97 views

What is the meaning of asset underlying the futures contract?

I am reading a book of J.C Hull on Future and option where he explained the basis risk which is S2 + F1 - F2 or F1 + b2 I got this concept but reading further he expand above expression as F1 + (S*2 - ...
zircon's user avatar
  • 101
1 vote
1 answer
95 views

Buying Puts to Hedge Against Second Market Plunge - Suggestions?

FT recently reported that hedge fund managers are buying puts on: stock indices and also on currencies sensitive to risk appetite such as the Australian dollar and the Korean won. Generally, what ...
Will's user avatar
  • 39
0 votes
2 answers
178 views

Gold and inflation

I am looking to use gold as an inflation hedge, however this article suggests it is not as good as one might believe. One thing I don't understand is that the inflation adjusted price is higher then ...
user123124's user avatar
  • 1,085
1 vote
0 answers
38 views

Does selling a related option affect the holding period for tax purposes?

Imagine the following scenario: I purchased 3 LEAP call options on XYZ in 2019 with a strike price of $200.00, expiring over a year from purchase in 2021. I also sold 3 call options on XYZ in 2019 ...
xirt's user avatar
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0 votes
1 answer
202 views

Is dynamic hedging a combination of writing covered calls and long puts?

Trying to figure out a simplified dynamic hedging strategy without getting into too much math. Based on Antifragile by NN Taleb, it appears an antifragile portfolio could be constructed with short ...
Seb Maitra's user avatar
0 votes
1 answer
69 views

CFD Value % per time decline due to fees

The picture above shows example of SHL stock (1000 shares) value (vertical) vs time horizontal axes. Redline shows ordinary SHL stock value overtime monthly. Greenline shows SHL STOCK+CFD value ...
Petkus 's user avatar
-2 votes
3 answers
156 views

How can hedging possibly profit you?

To wit, doesn't hedging necessarily break even or lose money? I assume the semi-strong form of the EMH, defined in Zvi Bodie, Alex Kane, Alan J. Marcus's Investments (2018 11 edn). p 338.       The ...
user avatar
-1 votes
2 answers
226 views

How to hedge against a potential collapse of the European Union? [closed]

I know this is unlikely, but the future of the EU looks bleak. The Coronavirus shattered the European states, making some override the Schengen Area rules and enforce cross-border checks. I'm looking ...
Paul Razvan Berg's user avatar
2 votes
0 answers
73 views

Tail hedging with cash

Vineer Bhansali in his book Tail Risk Hedging makes some claims regarding portfolio protection: For losses of 0% to -5%, just diversification For losses of -5% to -15%, alternative betas (momentum) ...
Ricardo's user avatar
  • 21
1 vote
0 answers
25 views

Tracking inconsistency in FX-hedged accumulating ETF

I am looking at historical data for the iShares S&P 500 GBP Hedged UCITS ETF (Acc) Exchange Traded Fund (ETF), with Epic ID IGUS. The objective of the ETF is to track the performance of the S&...
Daneel Olivaw's user avatar
0 votes
2 answers
95 views

Hedging currency in anticipation of relocating

I live in the US, so I use USD for daily activity, but I plan to move to the EU in <5 years and live there long term. My portfolio is currently denominated in 80% USD and 20% other, but I don't ...
user avatar
0 votes
2 answers
214 views

Long term LEAPs with calls written against them

I bought 3 LEAPs on XYZ at various times in 2019 which all expired in 14-17 months. I intend to sell or donate them once they reach long term status. However, I also wrote 3 CALL options on XYZ that ...
jasperdog's user avatar
1 vote
1 answer
9k views

What is the graph of hedging using put options?

An investor owns 1,000 Microsoft shares. The price is $28 per share. He is concerned about a possible share price decline in the next 2 months and wants protection. Buying ten July $27.50 put option ...
GGGG's user avatar
  • 55
1 vote
2 answers
190 views

Hedging a major sell off

Inspired by What is the relationship between taxes and annual liquidation of the markets?, If a major fund wanted to sell off enough stock to significantly affect market prices, could they hedge the ...
user avatar
0 votes
2 answers
261 views

How does trafigura hedges the price risk?

I wanted to know how does company like trafigura hedges against price risk? Example if trafigura agrees to sell say a barrell of WTI crude oil @ $56 3 months hence. How would they hedge it? Would ...
Stupid_Intern's user avatar