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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Thursday, February 24, 2011

timing is everything

stopped on short EURUSD trade at 13760 (didn't I say that I didn't like the technicals on this one... hmm), still sticking to short GBPUSD, but it looks shaky as it feels like USD is loosing safe heaven ground. so what's next safe heaven currency (apart of PM). Euro? will never buy it. Periphery is revolting again.

Middle East is likely going through boom bust scenario when it comes to oil. Short Brent at 119, s/l at 122, target sub 100. Libya exports 70% of its oil to Ireland, Italy and Austria (weak periphery). And it is very unlikely that rumours of unrest in Saudi Arabia will have effect on supply: 1. Saudi King is seen as reformer (already spent $34 billion on social programs). 2. he will likely to find dialogue rather then confrontation. 3. he is too important for the US for them to live this issue alone, so they will pressure him to give away.

working through boom bust theory, long USDCAD at 0.9880 s/l @ 0.9780, open target

too late to short base metals and stock indices...

good luck all....
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