I am a part of the team which is responsible for management and hedging of commodities exposures. Some say corporates are good only in following advice from banks or brokerages. I do agree corporates do not have market insight of a bank. But here is a problem. It is not bank or broker or a hedge fund that has biggest risk that markets will go against them. These guys always have an option to do nothing and wait for a better trading opportunity where as we don't. We have to continue to purchase commodities, spend currencies for daily business. Such company is always exposed to changes to market price even if it decides not to hedge. In fact my company has probably one of the biggest short commodities portfolio in the world. Managing such risk effectively is a challenge. It is like being between a rock and a hard place. You get your behind kicked all the time be senior management, whether it was a missed opportunity to hedge or hedge that turned to be out of the money. Critics will say if you lost money on your hedge then you probably bought it cheaper on physical market. let's face it, nobody wants to loose money, full-stop.

So I do not have an option to do nothing as I am always in the position (short in this case). I think people like me have higher motivation to earn positive return on their portfolio then other players. In fact my intention is to bring hedging to a performance benchmark of proprietary trading.

Search This Blog

Wednesday, June 2, 2010

It is all about one number this week

Today's post will be short as there is little to say. Intraday correlation of macro assets fell today. This makes me think that this relationship might break if NFP's (highly anticipated number on Friday) are very good, meaning stronger dollar, commodities and equities. However macro assets lack both direction and momentum currently and if there's no any good technical set up before the numbers I would stay in the market through options only.

Currently I see only NYMEX gas (see my previous post for market background) is building momentum and trying to break out of the range. Barring market sell off during tomorrow's inventory numbers, this is probably the best recovery play.

One link replaces thousand words )))... Michael Covel - a Turtle Trader gets emotional. I absolutely agree with him though, but, as I said before, my and probably his opinions never mattered to the market... It is still anticipating good NFP number on Friday.
Posted by at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)