Query on Commodities Hedging


I've been studying how merchants can hedge flat worth publicity when buying/promoting crude oil with crude futures. One thing doesn’t add as much as me. If you are going to buy crude, do you hedge by promoting or shopping for futures?

Instance: Let's say I’m a Trafi/gunvor/glencore dealer. For example, I enter into an settlement to buy 1000 crude barrels from West Africa for supply in two months on the Brent worth in 2 months – $2/bbl differential. Present spot crude buying and selling at $70/bbl. Let's say I hedge my publicity by promoting futures for supply in 2 months at $71/bbl.

In 2 months time, after supply of crude, 2 eventualities.

  1. Spot crude trades at $75/bbl. I buyback my futures at $75/bbl. My complete value = $81/bbl (75+4)
  2. Spot crude trades at $65/bbl. I buyback my futures at $65/bbl. My complete value = $59/bbl (65-6)

How does this add up. I’m not hedging any publicity right here. Shouldn't I be shopping for crude futures (and promoting futures subequently) once I buy crude and promote crude futures once I promote crude (and buyback futures subsequently)?

FYI that is from an article on danger administration by Trafi which is inflicting me all this confusion.

https://preview.redd.it/z5k0j9cxea0e1.png?width=692&format=png&auto=webp&s=7c743cd2be0f91d3bae0d1174fe87686e72300b5

submitted by /u/Significant_Gift_460
[comments]



Source link

Related articles

Ether Worth Enters ‘Perception Zone’ Following $5K All-Time Highs

Key takeaways:Ether’s long-term holder web unrealized revenue/loss indicator suggests the worth has entered the “perception” part.The market worth to realized worth suggests ETH is undervalued, with room to run towards $5,500.Ether’s rounded backside...

NOIA speaks out after Trump halts practically full Revolution Wind challenge

After the U.S. Division of the Inside ordered all work on the practically full Revolution Wind challenge to cease on Friday, Nationwide Ocean Industries Affiliation (NOIA) President Erik Milito issued the next assertion:  ...

Fixed Vary Detector MT4 Indicator

The Fixed Vary Detector MT4 Indicator is designed to...

Ulanzi D200H Deck Dock: The Final 7-in-1 Creator Hub With AI-Powered Workflow and Lighting Management

Because the world’s main model in pictures equipment, Ulanzi has constructed its identify on inexpensive, creator-friendly pictures gear. It has unveiled its newest all-in-one management and connectivity station — the D200H Deck Dock...

Jefferies raises S&P 500 year-end goal to six,600

And to place issues into perspective, Jefferies had solely beforehand raised their year-end goal for the S&P 500 to five,600 earlier than this again on the finish of July. So, that is two...
spot_img

Latest articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

WP2Social Auto Publish Powered By : XYZScripts.com