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.

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Friday, February 18, 2011

Selling GBP and EUR...

put your money where your mouth is...

this is just my view and not necessarily view of my company. Although I do not trade FX, but follow it closely, the developments over the last weeks in Europe, such as increasing talk of interest rates hikes, continuing political uncertainty on how the future would look like should expose the dark side of the "recovery". Simply betting that any further IR hike speculations for the economies that just plugged the wholes in their sinking ships and not solved them (keyword debt) would scare markets going further and $ will benefit from this (despite I don't like Ben's policies either). Out of two evil you choose the smallest one. Technically I like short GBP more then Euro, but European periphery will be devastated by IR shock...

I will be working on hypothetical portfolio, rationale and charts, but for the time being:

short EURUSD @ 1.3630 stop 1.3760 target under 1.30
short GBPUSD @ 1.6230 stop 1.6330 target under 1.58

time to be contrarian... looking for a good entry in the equity indices and commodities....
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