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

Thursday, July 15, 2010

A different approach - what could earnings season bring us? PART 3

I continue on my follow up of the earnings releases in DJ Industrial Average and price set upbefore and after earnings. So far:
1 Alcoa - sell. Two other blow out tops on above average volume resulted in new lows for the year. Difficult to find the down trend.
2 Intel - neutral going forward. Market gapped through 50d moving average, but closed at the lows of the day. Difficult to justify either up or down trend. An interesting read from CNBC: http://www.cnbc.com/id/38244083

3rd to report will be JPMorgan. It has similar set up as Intel post earnings:


We broke out of the downward channel which is in itself bullish development, however low volume remains a problem for a bullish case. After the performance of the first two companies that published the results it is more likely we will see similar price action - if results are good we will gap higher, but finish on the lows of the day.
Posted by at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)