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23

Hedging - You have an investment and are worried that the price might drop in the near future. You don't want to sell as this will realise a capital gain for which you may have to pay capital gains tax. So instead you make an investment in another instrument (sometimes called insurance) to offset falls in your investment. An example may be that you own ...


22

To avoid risk from rising interest rates, get a fixed rate mortgage. For the life of the mortgage your principal and interest payments will remain the same. Keep in mind that the taxes and insurance portion of your monthly payment may still go up. Because you own the property, the costs to maintain the property are your responsibility. If you rented this ...


18

Summary When you invest in an S&P500 index fund that is priced in USD, the only major risk you bear is the risk associated with the equity that comprises the index, since both the equities and the index fund are priced in USD. The fund in your question, however, is priced in EUR. For a fund like this to match the performance of the S&P500, which is ...


8

You could purchase Home Equity Insurance. Here is a paper by Robert Shiller and Allan Weiss about how it would work: Home Equity Insurance. Sadly this type of protection is hard to find.


8

How can one offset exposure created by real-estate purchase? provides a similar discussion. Even if such a product were available in the precise increments you need, the pricing would make it a loser for you. "There's no free lunch" in this case, and the cost to insure against the downside would be disproportional to the true risk. Say you bought a $100K ...


8

Shorting penny stocks is very risky. For example, read this investopedia article, which explains some of the problems. In general: Illiquidity. Illiquidity from a small number of buyers/sellers means that you will have a hard time covering your short position, particularly if it's going the wrong way. Difficulty with the transaction. You won't ...


8

Currency hedge means that you are somewhat protected from movements in currency as your investment is in gold not currency. So this then becomes less speculative and concentrates more on your intended investment. EDIT The purpose of the GBSE ETF is aimed for investors living in Europe wanting to invest in USD Gold and not be effected by movements in the ...


8

Sorry to sound snarky and harsh but this idea just isn't realistic. Why not buy currencies of democratic countries and short those of repressive regimes? Or buy companies that make toys and short those that make alcoholic beverages? Why? For the same reason that you don't "buy vegan companies and short companies that were found to be engaged in animal ...


7

Sometimes you may want to be in a position long term but are worried about short term volatility and the price going against you in that period. You don't want to sell and re-buy back later as this may trigger a capital gain. Plus you don't know the extent of the price drop or when it will start recovering, so an alternative is to hedge against any potential ...


7

The difference is in the interrelation between the varied investments you make. Hedging is about specifically offsetting a possible loss in an investment by making another related investment that will increase in value for the same reasons that the original investment would lose value. Gold, for instance, is often regarded as the ultimate hedge. Its value ...


7

You need to hope that a fund exists targeting the particular market segment you are interested in. For example, searching for "cloud computing ETF" throws up one result. You'd then need to read all the details of how it invests to figure out if that really matches up with what you want - there'll always be various trade-offs the fund manager has to make. ...


6

Note: I am making a USA-assumption here; keep in mind this answer doesn't necessarily apply to all countries (or even states in the USA). You asked two questions: I'm looking to buy a property. I do not want to take a risk on this property. Its sole purpose is to provide me with a place to live. How would I go about hedging against increasing ...


6

You can employ a hedging strategy using short selling, put options, or other methods that will partially neutralize your exposure to the overall market. e.g. You could short sell a market-wide index such as the S&P500, while going long (buying) the company you are interested in. Investopedia has a nice primer on this: A Beginner's Guide To Hedging ...


6

This is a snapshot of the Jan '17 puts for XBI, the biotech index. The current price is $65.73. You can see that even the puts far out of the money are costly. The $40 put, if you get a fill at $3, means a 10X return if the index drops to $10. A 70X return for a mild, cyclic, drop isn't likely to happen. Sharing youtube links is an awful way to ask a ...


6

You can calculate your exposure intuitively, by calculating your 'fx sensitivity'. Take your total USD assets, let's assume $50k. Convert to EUR at the current rate, let's assume 1 EUR : 1.1 USD, resulting in 45.5k EUR . If the USD strengthens by 1%, this moves to a rate of ~1.09, resulting in 46k EUR value for the same 50k of USD investments. From this you ...


6

How can I calculate my currency risk exposure? You own securities that are priced in dollars, so your currency risk is the amount (all else being equal) that your portfolio drops if the dollar depreciates relative to the Euro between now and the time that you plan to cash out your investments. Not all stocks, though, have a high correlation relative to the ...


5

Buy below market. Find someone who really is desperate to sell, and help them out. But help yourself out in the process. Treat the purchase of the property as an investor would, and make your money when you buy. Another thing to reconsider is selling down the road. Why not rent it out? I suspect there will still be a lot of people needing to rent. A ...


5

Depending on the Price of the ETF and the hedging you may well simply be guaranteed to make a small loss.


5

Depends on your time scale, but generally, I don't think it would work. What you'd really be betting on in this case is mean-reversal, which does not hold true in the equity universe (atleast not in the long run). If you look at the historical prices of the S&P, you'll notice it increases in terms of absolute dollar value. On the short term, however, if ...


5

I don't think that you understand hedging properly; to hedge one instrument, no matter the security type, with another the hedging instrument must be negatively correlated with the instrument that you are hedging. In layman's terms there must be an expectation that if Bitcoin rises then Ripple will fall and vice-versa. This is so that the loss from one is ...


5

The sort of "hedging" you have heard about on business TV simply doesn't apply to such bizarre/thin/unusual markets; and it only applies when large wholesale amounts of the item in question is in play. the concept is totally irrelevant to your situation. To "eliminate the risk", trivially sell to Dollars or Euros. One click.


4

You only have to own it for a day (or rather for some amount of time before the close of trading the day before the ex-dividend date). This is governed by exchange rules based on the date of record and payable date set by the company. You might want to look at this article or this one for more details. It should be difficult to make money from changes due ...


4

Read Examining VIX ETF Performance During A Sell-Off. The VIX is an index and can't be traded directly. Similar to the fact that you can't really buy the S&P index, you either try to replicate it yourself, or buy an ETF. The VIX ETFs, per this article, don't correlate 100% to the VIX itself. Not to be snarky, but specific to your question "how this ...


4

You have to take a look at the risks: You pick poorly, and only your house fails to make a profit. The entire area suffers a drop in prices The entire country suffers. A REIT or REIT index will not help in the 2nd and 3rd cases. The loses are too broad. The losses can be paper only for many people until they need to sell. In fact the only time there ...


4

The point of short-selling as a separate instrument is that you can you do it when you can't sell the underlying asset... usually because you don't actually own any of it and in fact believe that it will go down. Shorting allows you to profit from a falling price. Another (non-speculative) possibility is that you don't have the underlying asset right now (...


4

In this type of strategy profit is made when the shares go down as your main position is the short trade of the common stock. The convertible instruments will tend to move in about the same direction as the underlying (what it can be converted to) but less violently as they are traded less (lower volatility and lower volume in the market on both sides), ...


3

You could find some companies on the LSE that make their money renting residential real estate, and then buy put warrants. The problem with this, or any scheme, to protect you from a financial bubble is that you are trying to buy or create a "lottery ticket" that will pay off in states of the world where everyone is less wealthy. The "exchange rate" ...


3

Yes, housing market indexes, which have associated options and futures, can be used as a hedge to cover exposure due to real-estate purchases. The most well-known (only?) indexes are the Case-Schiller Housing Indexes. They are available for 12 or more regional real-estate markets in the U.S.A. There is a website exclusively devoted to them, describing ...


3

Options pricing is related to game theory. In sports, you like the Reds, I like the Greens. We wish to bet on a game. We can choose points to give the lower team's final score in order to make such a bet 50/50. Or knowing my Greens are far superior, I offer you odds. "If your Reds win, I will pay you 10 times your bet." The B-S model does a good ...


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