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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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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
268 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
8 votes
3 answers
3k 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 ...
cmhteixeira's user avatar
1 vote
1 answer
218 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 ...
Frames Catherine White's user avatar
0 votes
2 answers
333 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 ...
RQ77's user avatar
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1 answer
1k 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-...
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3 votes
1 answer
70 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 ...
Franck Dernoncourt's user avatar
3 votes
1 answer
982 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 ...
Birtan's user avatar
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2 answers
235 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 ...
Stefano Falasca's user avatar
1 vote
2 answers
140 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 ...
user avatar
1 vote
3 answers
382 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 ...
Leon's user avatar
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2 votes
1 answer
1k 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 ...
quetzy's user avatar
  • 226
2 votes
1 answer
327 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 ...
Gramatik's user avatar
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2 votes
3 answers
719 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 ...
Jer's user avatar
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5 votes
3 answers
540 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 ...
Ryan's user avatar
  • 430
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2 answers
5k 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 ...
Robbe Motmans's user avatar
1 vote
2 answers
206 views

Hedge against crypto currency / exchange risk

I have securities that have crypto-currencies (say, XBT/BTC) as a base currency and I want to avoid the tremendous volatility of this market. There are options for margin trading of sorts (shorts, ...
borgr's user avatar
  • 111
1 vote
2 answers
3k views

How exactly is a "replicating portfolio" a "hedge"?

Let us say that there is some stock which a year from now will have some value V. A replicating portfolio is a portfolio which will always equal V a year from now. Clearly, both the stock and the ...
Daredao's user avatar
  • 11
0 votes
1 answer
186 views

Easy ways to hedge against debt overleverage and potential inflation as a personal economic agent

Every prediction is correct... at some point in the future. However, there are economical indicators that would be considered teaching points if a financial crisis were to occur at any point in the ...
Antoni Parellada's user avatar
1 vote
1 answer
154 views

Hedging a portfolio using Bull Call Spreads

I'm having some difficulty understanding how one would hedge a portfolio using bull call spreads as outlined in the following paragraph ( Today is also a good day to revisit my suggestion for a long-...
trance.guru's user avatar
1 vote
3 answers
605 views

Hedging for inflation

I have liquidated my entire portfolio. I now have cash, earning low interest with tax. I want to build back my position, but am waiting for the right time in the market, likely higher interest rates. ...
Source's user avatar
  • 149
1 vote
2 answers
191 views

Do any stocks benefit from a rise in interest rates?

I am planning to hedge against various financial risks by buying stocks that benefit from those financial risks. For example, I use quite a lot of electricity. I have already purchased stocks of ...
juhist's user avatar
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0 votes
2 answers
135 views

Hedging against currency risk

Is there a hedging method against currency risk without lowering returns ? Classic hedging methods like forwards, futures options, all have a cost and don’t remove risk “for free”.
user71822's user avatar
-1 votes
1 answer
89 views

Forex instead of futures as a hedge

Why don’t companies use forex trading as a hedge for their foreign exchange risk instead of futures ? Forex is much more liquid than futures, easier to have access to all your positions anytime, ...
user71822's user avatar
-1 votes
1 answer
842 views

Hedging a long/short equity position with options?

If an individual was considering: LONG 100 AAPL shares at 150 SHORT 100 APPL shares at 150 How could he/she hedge the directional risk with options for those two trades? And what would be the ...
gcat's user avatar
  • 11
2 votes
1 answer
253 views

Confused about eurodollar futures

A eurodollar futures contract is a cash-settled futures contract based on a Eurodollar Time Deposit and having a principal value of USD $1,000,000 with a 3-month maturity. Suppose that a a bank ...
peter5's user avatar
  • 23
0 votes
1 answer
363 views

Hedging cryptos (or money in general)

I'm thinking about moving funds between various currencies. Right now I have USD ($) and Euros (€). My goal is to buy some Ripple (XRP), a cryptocurrency. Ripple can be traded against the €, the USD,...
Gil Sand's user avatar
  • 123
2 votes
1 answer
162 views

How do I hedge against currency risk without tying up a lot of capital?

Is there some kind of synthetic ETF that magnifies changes to exchange rates so that if, for example, the Canadian dollar increases by 5% with respect to the American dollar, the ETF will go up by 10% ...
Neil G's user avatar
  • 407
3 votes
4 answers
686 views

Is a currency "hedged" ETF actually a more speculative instrument than an unhedged version?

I've come across a few ETFs that are currency hedged. At first, the "hedged" part in the name seems to imply that this is somehow a safer investment than an unhedged version. However, take a look at ...
ku9182's user avatar
  • 47
2 votes
4 answers
5k views

How do I hedge stock options like market makers do?

I understand what an option is and I know that a market maker always publishes a bid and an ask price for which it will buy or sell options on the exchange. Now I heard that market makers always hedge ...
kramer65's user avatar
  • 121
1 vote
1 answer
484 views

Difference between Fair Value derivative and Speculation derivative [closed]

I understand the purpose of a fair value hedging instrument (preserve the fair value of an asset, liability, etc) and a speculation derivative (default classification if the derivative isn't ...
Oliver Mohr Bonometti's user avatar
5 votes
2 answers
1k views

Hedging against Exchange Rate Risk

I am an European, earning my salary in Euro and trading in US-securities. My strategies are a combination of momentum investments and monthly saving plans, where I invest a fixed percentage of my ...
user1934212's user avatar
2 votes
1 answer
93 views

When hedging with CFDs, buying and selling the same financial instrument, don't you end up earning nothing respectively losing because of the spread?

When hedging with CFDs, buying and selling the same financial instrument, don't you end up earning nothing respectively losing because of the spread?
Vitalis Hommel's user avatar
1 vote
1 answer
325 views

Portfolio choices to hedge the risk of a real estate property

Let's say there's an individual who owns a condominium apartment in a US city, which is being rented out to a tenant. There's still a mortgage owed on the apartment, but there's positive net equity ...
Eugene O's user avatar
  • 153
3 votes
2 answers
1k views

What's the formula for profits and losses when I delta hedge?

Say I buy a call option today, and I short the underlying stock with the delta. What is the value of this portfolio today? Then, one period later, say there's a change in the stock price. That also ...
Janui's user avatar
  • 31
2 votes
1 answer
254 views

What exactly is the profit and loss of a portfolio?

I've searched all over the internet, but have not found the answer to this question. When we 'delta-hedge', we make the value of a portfolio 0. Now, we know that an approximation of the change in a ...
Hvaso's user avatar
  • 21
3 votes
0 answers
79 views

Are Credit Default Swaps an adequate hedge for leveraged bond portfolio?

A hedge is supposed to be a cheaper bet that pays off if a primary bet isn't profitable. With a leveraged bond portfolio, my understanding is that a credit default swap (CDS) can help hedge, but I'm ...
CQM's user avatar
  • 20.2k
3 votes
1 answer
193 views

How to invest in a specific market without investing in a specific company?

Let's say I am bullish on "Cloud Computing" and I want to make one investment, but do not want to invest in any specific company (e.g. Amazon). How could I invest soundly in the "Cloud Computing" ...
grldsndrs's user avatar
  • 465
4 votes
2 answers
155 views

Investing tax (savings)

I am software development consultant acting as a sole trader (self employed). My main expenses are ultimately paying my self and some hosting. Every time I have an invoice paid I put a percentage ...
DarcyThomas's user avatar
2 votes
1 answer
220 views

How to read options prices

I have been doing research on Options and thus far most of it has been relatively theoretical (mainly pricing models and put/call hedging strategies). Recently I have been looking into actually ...
Mustard Tiger's user avatar
4 votes
1 answer
135 views

How to manage foreign investment allocations

I live in a country that has over the last year gone through some serious currency volatility based on political/economic uncertainty. I made a decision towards the end of last year to move a decent ...
ZASC's user avatar
  • 125
3 votes
1 answer
145 views

I am trying to start a "hedge fund," and by that, I really just mean I have a very specific and somewhat simple investment thesis that I want to

basically, I have a few stocks in mind that I want to sell short, so it will likely be just me, possibly one or two other people working very part-time, and that's about it. In any event, I will need ...
Matt Barber's user avatar
2 votes
4 answers
2k views

How to hedge an adjustable rate mortgage to lock in the current rate for the whole loan duration?

For a certain property my lender will only give an ARM (10 year fixed, 1 year adjustable afterwards), which is based off the U.S. Treasury rate. However I would really prefer a fixed rate mortgage. ...
user9809's user avatar
1 vote
0 answers
128 views

Using options to profit from underlying stock and warrants

I'm a suffering shareholder and have underlying stock and warrants (3 years remaining) and want to know how to profit from them using a option or hedge strategy. The current stock price is 30% below ...
KKlein's user avatar
  • 19
1 vote
1 answer
131 views

Costs around a modern crowd-sourced hedge fund

Consider the video from the front page of numer.ai. There, two statements are made 1) A hedge fund possesses a lot of expensive financial data [so numer.ai anonymizes this data before releasing it to ...
l7ll7's user avatar
  • 113
2 votes
2 answers
194 views

Hedging against an acquisition of a stock

Let's say I have done research and have a view that a public company's stock will go down due to worsening fundamentals. So normally then, one can express that view by shorting the stock. However, ...
Tarak's user avatar
  • 59
1 vote
3 answers
132 views

Unemployment Insurance Through Options

Both Kyle Bass (from about 8:00 - 9:40) and Mark Spitznagel discuss an approach to finance where an investor takes a small percentage of their wealth and bets on an unlikely outcome, expecting to lose ...
user541852587's user avatar
2 votes
2 answers
74 views

Are there any hedged international funds in India?

I live in India, and want to diversify into the foreign equity market, via a mutual fund offered in India. But I don't want to take on the currency risk. In some countries, funds are offered that ...
Kartick Vaddadi's user avatar
1 vote
2 answers
280 views

How do currency ETFs track the spot prices? And which amount one has to invest for full hedge?

I've got a couple of doubts about how currency ETFs work. How do they track the spot price? For example, I was checking the FX pair GBPUSD, I've seen: Spot price GBPUSD: $1.5382 ETF long GBP short ...
mickael's user avatar
  • 111
1 vote
1 answer
134 views

Hedging your personal assets

I have been recently reading about how derivative instruments (options, forwards, future contracts) are used to protect your securities. I started wondering if its similarly possible to hedge your ...
rambalachandran's user avatar