Hot answers tagged

38

You don't consume enough of any one good to make hedging with futures economical. I'll present an alternate method - you hedge against risk in household expenses by setting a budget and sticking to it. You may not be able to fully control the cost of toothpaste, but you can set an overall budget that includes some discretionary items, and adjust if prices ...


14

In the US, options (other than options on futures) are securities (like stocks), are regulated by the Securities and Exchange Commission (SEC), and can be traded in a normal brokerage account. Futures (even those on financial indexes) are commodities, are regulated by the Commodity Futures Trading Commission (CFTC), and require an account authorized for ...


12

These are just two products and not really an 'either-or' comparison; a little bit of apples and oranges. Still, there is some merit in looking at each product in the terms you've raised. Options [These securities give one person the 'option' to buy or sell an underlying security at a specific price, for a specific period of time. If I buy an AAPL call ...


11

The largest personal cost you have is probably housing - and you can hedge the risk of real estate fluctuations without use of financial instruments. ie: you can buy your home. You might not consider this 'using the financial markets', but if your goal is actual just 'a stable cost of living' as you say, then this can help with that. Of course, it adds on ...


9

In theory (but not practical in reality), you could hedge each of those expenses with various inflation swaps, futures, and other OTC products. Housing costs can be hedged by exposing to REITs returns through LEAP Call options Utility costs can be hedged by exposure to natural gas futures and call options on utility companies. Gas can be hedged using an oil ...


4

If your costs are in US dollars, I-Bonds adjust yield and TIPS adjust principal periodically using the US government's CPI-U measure of consumer price inflation, including food and energy. Whether the CPI-U national aggregate average market basket corresponds well with yours is a separate question to review.


3

Yep... you could buy in bulk. If you think the price of toothpaste will go up in the next week, bulk buy 50 tubes now. If they go up, you've won, if they stay the same, you haven't lost anything. Household goods like that don't usually drop in value, so it'd be hard to lose, but they do go on sale, so buy in bulk when there is a sale or from a wholesale ...


2

There's no futures market for most retail consumer products to support individuals hedging. As others have mentioned, housing is one of the biggest expenses you have, so buying a home or having a long-term lease is a way of stabilizing this cost. Utilities may offer long-term contracts. This gives you predictable expenses now, but you could get a shock when ...


Only top voted, non community-wiki answers of a minimum length are eligible