Talk:Hedging

Risk

• How do you sell a risk?

That is a pretty broad question. But I will take a stab at. The risk has to relate to something. So suppose you are a cattlemen, or a farmer or you’re a miner. If the commodity that you have, has an increasing value because of some external event. Your risk might be that prices will change.

If as a businessperson you can turn a profit at the current price. Your risk is that prices will change may affect you in a non-positive way.

You can sell your risk of price change by selling it ahead of time i.e., sell it in the future, NOW.

This is pretty much what we do trading futures. Transfer (sell) risk to somebody else.

Sell part of your herd now.

Sell part of your crop now.

Sell next years mined material now. GT

Is Speculation a business?

Hedging is a strategy, usually some form of transaction, designed to minimise exposure to an unwanted business risk.

Hedging your bets, is that business?