| SEP 1983
Modern Hedging For Everyone by DR. BASIL VENITIS
Modern Hedging For Everyone. by DR. BASIL VENITIS The business world is entering a new period full of excitement, which one day might well be called the Era of Hedging. When this period matures, everyone in the free enterprise system will probably be directly or indirectly involved in hedging! What is hedging? It is the arbitrage* between futures and their corresponding spot commodities financial instruments, or services. The classical hedger assumes a futures position exactly opposite to his spot position. For him, hedging is a sort of insurance against severe price fluctuations. On the other hand, the modern hedger not only seeks protection from price fluctuations, but he also tries to profit from the variations of basis, which is the difference between futures and spot prices. The modern hedger speculates on the basis variation by placing and lifting the hedge several times on part of his inventory. Under normal circumstances, the futures prices are higher than the spot prices due to carrying cost. This market is called a normal market or a carrying charge market or contango. However, when traders are worried about possible shortages, then the futures are discounted to spots, and this is called an inverted market. Of course, when the futures contract matures, the spot price is almost equal to the futures price.
by DR. BASIL VENITIS
Technical Analysis of STOCKS & COMMODITIES
The Traders’ Magazine since 1982
has had over 1,226,237 subscribers from 174 different countries.
37,000 Page Traders’ Archive for $89.99
To continue reading, sign-up for trial access to Traders.com and the S&C Archive — 37,000 pages of trading ideas!
After verifying your email address, you will have limited access to the S&C Archive, as well as access to a Digital Edition of S&C, and access to Traders.com Advantage and Working Money for 30 days.
Not a subscriber to Technical Analysis of
STOCKS & COMMODITIES magazine?
Click
here to subscribe, or request
a trial subscription.
Log-in now to view articles from the S&C Archive.
Your Subscriber ID is located at the top of your magazine label, highlighted here in red.
Your last name can be found on the second line, highlighted here in blue.
*If you have a company name on the label, that can also be used. It will appear below your name on the label.
If you do not have a Subscriber ID on your label, you can find it on your statement or renewal form.
For help locating your Subscriber ID number, please call us at 1-800-832-4642 or send an email to Survey@Traders.com. If sending an email, please include your name and mailing address.