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 25, 2011

update on open trades

-moving short Brent @119 to 115, that daily candle has the biggest shadow I've ever seen, a long term top?
-moving short GBPUSD to breakeven at 1.6230 (didn't you get it? this economy is rubbish... and you still want to raise interest rates? oh please do and watch the consequences.
-leaving long USDCAD as is: entry 0.9880 s/l 0.9780, open target - there was little follow through on lower oil prices - getting nervous there

Egypt stock exchange is closed, Italians kept the exchange closed during bad news, now LSE... keep people happy at all costs.
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