Questions tagged [hedging]

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

Filter by
Sorted by
Tagged with
0
votes
0answers
60 views

Unintended information asymmetry in the stock market caused by options market makers

I just went over a publication "Hedging by Options Market Makers: Theory and Evidence" by Sahn-Wook Huh, Hao Lin and Antonio S.Mello One of the ideas they touch on, is that Options Market ...
0
votes
0answers
41 views

How do I hedge currencies when buying foreign bonds?

The majority of my income and savings are in Singapore dollars (SGD). For practical purposes, this is my "base currency". When buying foreign bonds and bond funds denominated in foreign ...
0
votes
1answer
54 views

(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 ...
0
votes
2answers
52 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 ...
0
votes
0answers
18 views

I need help understanding a type of futures strategy

I need some help with futures for my finance class. I was given example where a long future is countered with a short future. However, I can't really work out why it's beneficial (the instructions are ...
1
vote
2answers
81 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 ...
0
votes
1answer
145 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 ...
0
votes
0answers
24 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?
0
votes
0answers
34 views

duration and convexity hedging in a bond portfolio

I understand the concepts of Duration and Convexity when talking about bonds. Is my understanding of how we hedge, and add / remove duration and convexity from a bond portfolio? Generally, if the ...
2
votes
2answers
274 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 ...
37
votes
12answers
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 ...
0
votes
1answer
65 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 ...
0
votes
2answers
119 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 ...
3
votes
3answers
55 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 ...
3
votes
1answer
56 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 ...
2
votes
1answer
165 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 ...
0
votes
0answers
45 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 ...
-1
votes
2answers
108 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 ...
19
votes
7answers
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 ...
1
vote
2answers
102 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 ...
6
votes
3answers
1k 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 ...
0
votes
1answer
148 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 ...
1
vote
1answer
102 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 ...
0
votes
1answer
53 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 - ...
1
vote
1answer
82 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 ...
0
votes
2answers
157 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 ...
0
votes
1answer
142 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 ...
0
votes
1answer
66 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 ...
-2
votes
3answers
129 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 ...
-1
votes
2answers
212 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 ...
2
votes
0answers
65 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) ...
0
votes
2answers
89 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 ...
0
votes
1answer
115 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 ...
1
vote
1answer
5k 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 ...
1
vote
2answers
186 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 ...
0
votes
2answers
202 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 ...
6
votes
3answers
2k views

What is the difference between these 2 S&P500 tracking iShare ETFs?

Relevance of the following discussion How can a investor from the UK invest in the S&P500 without being exposed to currency risk? There are at least the following two low cost ETFs. If I had ...
1
vote
1answer
214 views

Is it viable to use betting sites to "hedge" against world events?

These days gambling of world events, like a No-deal Brexit, or the results of an election is a fairly well established thing. (I imagine most people do it as a bit of a laugh) I am wondering if one ...
0
votes
2answers
220 views

Forward contract hedge and market-maker

Referring to McDonald's Derivatives Markets book, a market-maker or arbitrageur must be able to offset the risk of a forward contract. It is possible to do this by creating a synthetic forward ...
0
votes
1answer
948 views

Spitznagel Black Swan Hedging

I am reading about how Spitznagel does hedging from Forbes - Protect your Tail. It's unclear to me how he is getting the returns he is claiming, Spitznagel's hedges mostly involve buying far-out-of-...
3
votes
1answer
65 views

Do USD-denominated ETFs offer the same protection than EUR-denominated ETFs against a weakening USD->EUR exchange rate?

Do USD-denominated ETFs offer the same/similar protection than EUR-denominated ETFs against a weakening USD->EUR exchange rate? Assume that these ETFs solely contains European holdings (e.g., firms ...
3
votes
1answer
606 views

Put Option Payoff Replication (Dynamic Hedging)

We know that we can use the below equation in the link to replicate the payoff of a call option using stocks and bonds. I am wondering what the equation would look like for a put option instead. In ...
0
votes
2answers
191 views

can't find suitable prices for zero cost collar

I was reading about the zero cost option collar strategy and was puzzled by the idea that one can find an at-the-money put option for the same price as an out-of-the-money call. I've looked at the ...
1
vote
2answers
133 views

Hedging investment contributions against short term fluctuations

When contributing to investments, short term fluctuations can hurt my contributions by a few percent or more. By short term, I mean on the scale of days to several weeks. I have found that a proper ...
1
vote
3answers
340 views

Is crypto an uncorrelated (or negatively correlated to traditional markets) asset class?

In preparation for an upcoming financial crisis, for instance, something of the magnitude of the 2008's capital C crisis, would crypto (given their current market size and state) be (part of) a good ...
2
votes
1answer
832 views

How can an EU citizen best hedge NASDAQ?

Background: I have a NASDAQ-heavy portfolio, and wanted to use the SQQQ ETF (Short leveraged Nasdaq-100 ETF) as a way to hedge on days when I expect the whole index to go down (one sub-question here ...
2
votes
1answer
288 views

How should a portfolio be managed in preparation for a financial crisis?

There is a more general question on preparation here, I am focused purely on investment. There is the conventional wisdom of don't try to time the market, and while I can't find the quote at the ...
2
votes
3answers
546 views

What hedging strategy can I use to approximate selling one half of an in-the-money option contract?

Apologies if the question title is confusing; I'll explain: I have one contract of an expensive call option which is in-the-money and expires next year. It has roughly tripled since I bought it, and ...
5
votes
3answers
495 views

Vegan hedge (shorting non-vegan, long vegan)

Edited in response to comments. How could I isolate a bet on veganism? (Assume that most of my wealth is already invested passively in diversified index funds and that for alpha with a different ...
0
votes
2answers
4k views

Delta hedge a put option without a long position on the underlying stock

I'm fairly new in this field so if I make a mistake please correct me. I have a beginners question about hedging. The delta of a put option is always negative so to delta hedge a put option I would ...