SlideShare a Scribd company logo
The Derivatives HEDGING WITH FUTURES SKOOL COMPUTER EDUCATION
TYPES OF TRADERS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
HEDGING EXAMPLES ,[object Object],[object Object]
ARBITRAGE EXAMPLE ,[object Object],[object Object]
1. GOLD: AN ARBITRAGE OPPORTUNITY? ,[object Object],[object Object],[object Object],[object Object],[object Object]
2. GOLD: ANOTHER ARBITRAGE OPPORTUNITY? ,[object Object],[object Object],[object Object],[object Object],[object Object]
THE FUTURES PRICE OF GOLD ,[object Object],[object Object],[object Object],[object Object],[object Object]
INTRODUCTION ,[object Object],[object Object],[object Object],[object Object],[object Object]
FUTURES CONTRACTS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
THE ELEMENTS OF STANDARDIZATION OF FUTURES CONTRACTS ,[object Object],[object Object],[object Object],[object Object],[object Object]
IMM 3-MONTH EURODOLLAR FUTURES CONTRACT EXAMPLE OF FUTURES CONTRACT STANDARDIZED TERMS Cash settled Delivery: The second London bank business day immediately preceding the third Wednesday of the contract month Last trading day: 7:20 a.m. – 2:00 p.m. (Chicago time), Mon. – Fri, except on the last trading day of an expiration contract, when trading closes at 9:30 a.m. (3:30 p.m. London time).  The contract also trades on the Globex   system Trading Hours: March, June, September, December; Serial Months, Spot Month Contract Months No limit Daily Price Limit: Eurodollar time deposit having a principal of $1 million with a 3-month maturity Trading Unit:
HENRY HUB NATURE GAS FUTURES EXAMPLE OF FUTURES CONTRACT STANDARDIZED TERMS Pipeline specifications in effect at the time of deliver Quality Specifications No earlier than the first calendar day of the delivery month and must be completed no later than the last calendar day of the delivery month.  Delivery Period: Sabine Pipe Line Co.’s Henry Hub in LA.  Seller is responsible for movement of gas through the Hub; the buyer from the  Hub.  Hub fee paid by the seller. Delivery Three business days prior to the first calendar month day of the delivery month Last trading day: 10:00 a.m. – 3:10 p.m. (NY time), Mon. – Fri, for any open outcry session.  After-hours trading is conducted via NYMEX ACCESS   electronic trading system from 4:00 – 7:00 p.m.,  Monday through Thursday Trading Hours: 36 consecutive months commencing with the next calendar month Contract Months $1.50 per MMBtu ($15,000 per contract) for first 2 months.  Initial back month limits of $0.15 per MMBtu rise to $0.3 per MMBtu if the previous day’s settlement price in any back month is at $0.15 limit Daily Price Limit: Dollars and cents per MMBtu Price Quotation: 10,000 million British Thermal Units (MMBtu) Trading Unit:
THE ASSET ,[object Object]
CONTRACT SIZE ,[object Object]
DELIVERY ARRANGEMENTS ,[object Object]
PRICE QUOTES ,[object Object],[object Object],[object Object]
LIMIT UP/DOWN ,[object Object],[object Object],[object Object]
POSITION LIMITS ,[object Object],[object Object],[object Object]
MARGINS ,[object Object],[object Object],[object Object]
MARGINS ,[object Object],[object Object],[object Object]
MARGINS ,[object Object],[object Object],[object Object],[object Object]
MARGINS ,[object Object],[object Object],[object Object]
CLEARNING HOUSE ,[object Object],[object Object],[object Object],[object Object],[object Object]
EXAMPLE OF A FUTURES TRADE ,[object Object],[object Object],[object Object],[object Object],[object Object]
DAILY MARK-TO-MARKET EXAMPLE
A POSSIBLE OUTCOME Daily Cumulative Margin Futures Gain Gain Account Margin Price (Loss) (Loss) Balance Call Day (US$) (US$) (US$) (US$) (US$) 400.00 4,000 5-Jun 397.00 (600) (600) 3,400 0 . . . . . . . . . . . . . . . . . . 13-Jun 393.30 (420) (1,340) 2,660 1,340 . . . . . . . . . . . . . . . . . 19-Jun 387.00 (1,140) (2,600) 2,740 1,260 . . . . . . . . . . . . . . . . . . 26-Jun 392.30 260 (1,540) 5,060 0 + = 4,000 3,000 + = 4,000 <
OTHER KEY POINTS ABOUT FUTURES ,[object Object],[object Object],[object Object]
DELIVERY ,[object Object],[object Object],[object Object]
SOME TERMINOLOGY FOR FUTURES: NEWSPAPER QUOTES ,[object Object],[object Object],[object Object],[object Object],[object Object]
FUTURES-SPOT CONVERGENCE ,[object Object],[object Object]
FUTURES-SPOT CONVERGENCE ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
HEDGING WITH FUTURES ,[object Object],[object Object],[object Object]
BASIS RISK ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
LONG HEDGE ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
SHORT HEDGE ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
BASIS RISK:  DIFFERENT MATURITIES ,[object Object],[object Object],[object Object],[object Object]
BASIS RISK:  DIFFERENT MATURITIES ,[object Object],[object Object],[object Object]
BASIS RISK:  DIFFERENT MATURITIES  ,[object Object],[object Object],[object Object]
BASIS RISK:  DIFFERENT ASSETS ,[object Object],[object Object],[object Object],[object Object]
BASIS RISK:  DIFFERENT ASSETS ,[object Object],[object Object],[object Object]
OPTIMAL HEDGE RATIO ,[object Object],[object Object],[object Object],[object Object]
OPTIMAL HEDGE RATIO Proportion of the exposure that should optimally be hedged is where   S   is the standard deviation of   S , the change in the spot price during the hedging period,   F  is the standard deviation of   F , the change in the futures price during the hedging period    is the coefficient of correlation between   S  and   F .
ROLLING THE HEDGE ,[object Object],[object Object],[object Object]
ROLLING THE HEDGE ,[object Object],[object Object]
ROLLING THE HEDGE  Another Possibility ,[object Object],[object Object],[object Object]
ROLLING THE HEDGE  Another Possibility ,[object Object],[object Object]
ROLLING THE HEDGE  Another Possibility
ROLLING THE HEDGE  Another Possibility

More Related Content

What's hot

Derivatives market
Derivatives marketDerivatives market
Derivatives market
Alankar Das
 
Derivatives
DerivativesDerivatives
Derivatives
gccgopalan
 
Bacics Of Derivatives
Bacics Of DerivativesBacics Of Derivatives
Bacics Of Derivatives
yehyakhan
 
Forward and Futures Contract
Forward and Futures ContractForward and Futures Contract
Forward and Futures Contract
Rana Zeshan
 
Derivatives and Hedging | Finance
Derivatives and Hedging | FinanceDerivatives and Hedging | Finance
Derivatives and Hedging | Finance
Transweb Global Inc
 
Endowment Policy SSR
Endowment Policy SSREndowment Policy SSR
Endowment Policy SSR
Sudhir Singh Rajput
 
Unit 2 structure of option market
Unit 2 structure of option marketUnit 2 structure of option market
Unit 2 structure of option marketSudarshan Kadariya
 
Unit ii
Unit iiUnit ii
Lecture 12 interest rate derivatives
Lecture 12   interest rate derivativesLecture 12   interest rate derivatives
Lecture 12 interest rate derivatives
Quan Risk
 
Hedging
Hedging Hedging
Derivatives market
Derivatives marketDerivatives market
Derivatives marketNikhiliit
 
Derivatives futures,options-presentation-hareesh
Derivatives futures,options-presentation-hareeshDerivatives futures,options-presentation-hareesh
Derivatives futures,options-presentation-hareesh
Hareesh M
 
Financial derivatives
Financial derivativesFinancial derivatives
Financial derivatives
Venkat Kothakota
 
Financial derivatives ppt
Financial derivatives pptFinancial derivatives ppt
Financial derivatives ppt
VaishnaviSavant
 
Bond portfolio management
Bond portfolio managementBond portfolio management
Bond portfolio management
Ankit Michael Samuel
 
Swaps
SwapsSwaps

What's hot (20)

Derivatives market
Derivatives marketDerivatives market
Derivatives market
 
Derivatives
DerivativesDerivatives
Derivatives
 
Futures contract
Futures contractFutures contract
Futures contract
 
Bacics Of Derivatives
Bacics Of DerivativesBacics Of Derivatives
Bacics Of Derivatives
 
Forward and Futures Contract
Forward and Futures ContractForward and Futures Contract
Forward and Futures Contract
 
Derivatives and Hedging | Finance
Derivatives and Hedging | FinanceDerivatives and Hedging | Finance
Derivatives and Hedging | Finance
 
Ppt 9-derivatives-16-5-12
Ppt 9-derivatives-16-5-12Ppt 9-derivatives-16-5-12
Ppt 9-derivatives-16-5-12
 
Endowment Policy SSR
Endowment Policy SSREndowment Policy SSR
Endowment Policy SSR
 
Futures and options
Futures and optionsFutures and options
Futures and options
 
Unit 2 structure of option market
Unit 2 structure of option marketUnit 2 structure of option market
Unit 2 structure of option market
 
Unit ii
Unit iiUnit ii
Unit ii
 
Lecture 12 interest rate derivatives
Lecture 12   interest rate derivativesLecture 12   interest rate derivatives
Lecture 12 interest rate derivatives
 
Hedging
Hedging Hedging
Hedging
 
Derivatives market
Derivatives marketDerivatives market
Derivatives market
 
Derivatives futures,options-presentation-hareesh
Derivatives futures,options-presentation-hareeshDerivatives futures,options-presentation-hareesh
Derivatives futures,options-presentation-hareesh
 
Financial derivatives
Financial derivativesFinancial derivatives
Financial derivatives
 
Financial derivatives ppt
Financial derivatives pptFinancial derivatives ppt
Financial derivatives ppt
 
Bond portfolio management
Bond portfolio managementBond portfolio management
Bond portfolio management
 
Options, caps, floors
Options, caps, floorsOptions, caps, floors
Options, caps, floors
 
Swaps
SwapsSwaps
Swaps
 

Viewers also liked

Hedging
HedgingHedging
Hedging
Ashish Nangla
 
HEDGING
HEDGINGHEDGING
HEDGING
Amlin David
 
The Definition of a Stock
The Definition of a StockThe Definition of a Stock
The Definition of a Stock
Dhanashri Academy
 
Risk managing turbulent markets
Risk managing turbulent marketsRisk managing turbulent markets
Risk managing turbulent markets
Sandip Sen
 
Getting Started On Commodities
Getting Started On CommoditiesGetting Started On Commodities
Getting Started On Commodities
NicolasRR
 
LMEprecious Presentation
LMEprecious PresentationLMEprecious Presentation
LMEprecious Presentation
World Gold Council
 
commodity market- Copper
commodity market- Coppercommodity market- Copper
commodity market- CopperDishant Nagrani
 
World ferrous scrap market
World ferrous scrap marketWorld ferrous scrap market
World ferrous scrap market
jarekmlodziejewski
 
Gestion des risques de volatilité des prix des matières premières par Marcel ...
Gestion des risques de volatilité des prix des matières premières par Marcel ...Gestion des risques de volatilité des prix des matières premières par Marcel ...
Gestion des risques de volatilité des prix des matières premières par Marcel ...
Audrey Bayard
 
The Value Chain of Copper – from Mine to Application
The Value Chain of Copper – from Mine to ApplicationThe Value Chain of Copper – from Mine to Application
The Value Chain of Copper – from Mine to Application
Leonardo ENERGY
 
Hedging & Trading sul London Metal Exchange
Hedging & Trading sul London Metal ExchangeHedging & Trading sul London Metal Exchange
Hedging & Trading sul London Metal Exchange
Stefano Evangelista
 
Economic of Copper Processing
Economic of Copper ProcessingEconomic of Copper Processing
Economic of Copper Processing
Pambudi Pajar Pratama
 
Currency Trading Strategies
Currency Trading StrategiesCurrency Trading Strategies
Currency Trading Strategiesflame2011
 
Electric Motor Systems: targeting and implementing efficiency improvements
Electric Motor Systems: targeting and implementing efficiency improvementsElectric Motor Systems: targeting and implementing efficiency improvements
Electric Motor Systems: targeting and implementing efficiency improvements
Leonardo ENERGY
 
Commodity trading
Commodity tradingCommodity trading
Commodity trading
eduCBA
 
OPTION-STRATEGIES-final
OPTION-STRATEGIES-finalOPTION-STRATEGIES-final
OPTION-STRATEGIES-finalMariam Latif
 
Players in a Derivative Market - Barings Bank Case
Players in a Derivative Market - Barings Bank CasePlayers in a Derivative Market - Barings Bank Case
Players in a Derivative Market - Barings Bank Case
Kapil Agrawal
 
24867879 inventory-management-control-lecture-3
24867879 inventory-management-control-lecture-324867879 inventory-management-control-lecture-3
24867879 inventory-management-control-lecture-3Harshawardhan Thakare
 

Viewers also liked (20)

Hedging
HedgingHedging
Hedging
 
HEDGING
HEDGINGHEDGING
HEDGING
 
Hedging
HedgingHedging
Hedging
 
The Definition of a Stock
The Definition of a StockThe Definition of a Stock
The Definition of a Stock
 
Risk managing turbulent markets
Risk managing turbulent marketsRisk managing turbulent markets
Risk managing turbulent markets
 
Getting Started On Commodities
Getting Started On CommoditiesGetting Started On Commodities
Getting Started On Commodities
 
LMEprecious Presentation
LMEprecious PresentationLMEprecious Presentation
LMEprecious Presentation
 
commodity market- Copper
commodity market- Coppercommodity market- Copper
commodity market- Copper
 
World ferrous scrap market
World ferrous scrap marketWorld ferrous scrap market
World ferrous scrap market
 
Gestion des risques de volatilité des prix des matières premières par Marcel ...
Gestion des risques de volatilité des prix des matières premières par Marcel ...Gestion des risques de volatilité des prix des matières premières par Marcel ...
Gestion des risques de volatilité des prix des matières premières par Marcel ...
 
The Value Chain of Copper – from Mine to Application
The Value Chain of Copper – from Mine to ApplicationThe Value Chain of Copper – from Mine to Application
The Value Chain of Copper – from Mine to Application
 
Hedging & Trading sul London Metal Exchange
Hedging & Trading sul London Metal ExchangeHedging & Trading sul London Metal Exchange
Hedging & Trading sul London Metal Exchange
 
Economic of Copper Processing
Economic of Copper ProcessingEconomic of Copper Processing
Economic of Copper Processing
 
Currency Trading Strategies
Currency Trading StrategiesCurrency Trading Strategies
Currency Trading Strategies
 
Electric Motor Systems: targeting and implementing efficiency improvements
Electric Motor Systems: targeting and implementing efficiency improvementsElectric Motor Systems: targeting and implementing efficiency improvements
Electric Motor Systems: targeting and implementing efficiency improvements
 
Commodity trading
Commodity tradingCommodity trading
Commodity trading
 
OPTION-STRATEGIES-final
OPTION-STRATEGIES-finalOPTION-STRATEGIES-final
OPTION-STRATEGIES-final
 
Players in a Derivative Market - Barings Bank Case
Players in a Derivative Market - Barings Bank CasePlayers in a Derivative Market - Barings Bank Case
Players in a Derivative Market - Barings Bank Case
 
Commodity exchange
Commodity exchangeCommodity exchange
Commodity exchange
 
24867879 inventory-management-control-lecture-3
24867879 inventory-management-control-lecture-324867879 inventory-management-control-lecture-3
24867879 inventory-management-control-lecture-3
 

Similar to 002 Hedging With Futures

Futures - Forex Management Chapter II - Part II
Futures - Forex Management Chapter II - Part IIFutures - Forex Management Chapter II - Part II
Futures - Forex Management Chapter II - Part II
Swaminath Sam
 
Guide to Financial Derivatives
Guide to Financial DerivativesGuide to Financial Derivatives
Guide to Financial Derivatives
Ruben Garcia Navarro
 
Derivatives
DerivativesDerivatives
Derivatives
Rahul Kantak
 
Financial Derivatives.pptx
Financial Derivatives.pptxFinancial Derivatives.pptx
Financial Derivatives.pptx
Sunil Bhardwaj
 
PPT Financial Derivatives, Scope and Importance
PPT Financial Derivatives, Scope and ImportancePPT Financial Derivatives, Scope and Importance
PPT Financial Derivatives, Scope and Importance
MalkeetSingh85
 
Derivatives
DerivativesDerivatives
Derivatives
Aman Bansal
 
Financial derivatives
Financial derivativesFinancial derivatives
Financial derivatives
mittali1503
 
What is the Meaning of Financial Derivatives
What is the Meaning of Financial DerivativesWhat is the Meaning of Financial Derivatives
What is the Meaning of Financial Derivatives
Dhanashri Academy
 
Financialderivativesppt priyanka
Financialderivativesppt priyankaFinancialderivativesppt priyanka
Financialderivativesppt priyanka
PRIYANKA BHATI
 
Financialderivativesppt priyanka
Financialderivativesppt priyankaFinancialderivativesppt priyanka
Financialderivativesppt priyanka
PRIYANKA BHATI
 
Futures vs forex trading by Trade12
Futures vs forex trading by Trade12Futures vs forex trading by Trade12
Futures vs forex trading by Trade12
Trade12
 
forwardandfutures-190403011949.pptx
forwardandfutures-190403011949.pptxforwardandfutures-190403011949.pptx
forwardandfutures-190403011949.pptx
RAJI585568
 
Derivatives lecture1& 2-introduction
Derivatives lecture1& 2-introductionDerivatives lecture1& 2-introduction
Derivatives lecture1& 2-introductioniipmff2
 
cash future forward market
cash future forward marketcash future forward market
cash future forward market
Tanvi Pagare
 
forwardandfutures-190403011949.pdf
forwardandfutures-190403011949.pdfforwardandfutures-190403011949.pdf
forwardandfutures-190403011949.pdf
Uma Yadav
 
F R A.pptx
F R A.pptxF R A.pptx
F R A.pptx
ElixirElixir
 
Forward Rate Agreement ppt
Forward Rate Agreement pptForward Rate Agreement ppt
Forward Rate Agreement ppt
Nawal Meraj
 
Derivative primers
Derivative primersDerivative primers
Derivative primers
rakeshverma4271
 
Currency futures hedging effectiveness in cme group
Currency futures hedging effectiveness in cme groupCurrency futures hedging effectiveness in cme group
Currency futures hedging effectiveness in cme group
Rubel Theresearcher
 

Similar to 002 Hedging With Futures (20)

Futures - Forex Management Chapter II - Part II
Futures - Forex Management Chapter II - Part IIFutures - Forex Management Chapter II - Part II
Futures - Forex Management Chapter II - Part II
 
Guide to Financial Derivatives
Guide to Financial DerivativesGuide to Financial Derivatives
Guide to Financial Derivatives
 
Derivatives
DerivativesDerivatives
Derivatives
 
Financial Derivatives.pptx
Financial Derivatives.pptxFinancial Derivatives.pptx
Financial Derivatives.pptx
 
PPT Financial Derivatives, Scope and Importance
PPT Financial Derivatives, Scope and ImportancePPT Financial Derivatives, Scope and Importance
PPT Financial Derivatives, Scope and Importance
 
Derivatives
DerivativesDerivatives
Derivatives
 
Financial derivatives
Financial derivativesFinancial derivatives
Financial derivatives
 
What is the Meaning of Financial Derivatives
What is the Meaning of Financial DerivativesWhat is the Meaning of Financial Derivatives
What is the Meaning of Financial Derivatives
 
Financialderivativesppt priyanka
Financialderivativesppt priyankaFinancialderivativesppt priyanka
Financialderivativesppt priyanka
 
Financialderivativesppt priyanka
Financialderivativesppt priyankaFinancialderivativesppt priyanka
Financialderivativesppt priyanka
 
Futures vs forex trading by Trade12
Futures vs forex trading by Trade12Futures vs forex trading by Trade12
Futures vs forex trading by Trade12
 
Derivatives
DerivativesDerivatives
Derivatives
 
forwardandfutures-190403011949.pptx
forwardandfutures-190403011949.pptxforwardandfutures-190403011949.pptx
forwardandfutures-190403011949.pptx
 
Derivatives lecture1& 2-introduction
Derivatives lecture1& 2-introductionDerivatives lecture1& 2-introduction
Derivatives lecture1& 2-introduction
 
cash future forward market
cash future forward marketcash future forward market
cash future forward market
 
forwardandfutures-190403011949.pdf
forwardandfutures-190403011949.pdfforwardandfutures-190403011949.pdf
forwardandfutures-190403011949.pdf
 
F R A.pptx
F R A.pptxF R A.pptx
F R A.pptx
 
Forward Rate Agreement ppt
Forward Rate Agreement pptForward Rate Agreement ppt
Forward Rate Agreement ppt
 
Derivative primers
Derivative primersDerivative primers
Derivative primers
 
Currency futures hedging effectiveness in cme group
Currency futures hedging effectiveness in cme groupCurrency futures hedging effectiveness in cme group
Currency futures hedging effectiveness in cme group
 

More from Vinuthan S Murthy

General physics
General physicsGeneral physics
General physics
Vinuthan S Murthy
 

More from Vinuthan S Murthy (7)

Work, power and energy
Work, power and energyWork, power and energy
Work, power and energy
 
Laws of motion
Laws of motionLaws of motion
Laws of motion
 
Kinematics
KinematicsKinematics
Kinematics
 
General physics
General physicsGeneral physics
General physics
 
004 Valuing Cash Flows
004 Valuing Cash Flows004 Valuing Cash Flows
004 Valuing Cash Flows
 
003 Futures And Forwards
003 Futures And Forwards003 Futures And Forwards
003 Futures And Forwards
 
001 Financial Derivatives
001 Financial Derivatives001 Financial Derivatives
001 Financial Derivatives
 

Recently uploaded

how to sell pi coins effectively (from 50 - 100k pi)
how to sell pi coins effectively (from 50 - 100k  pi)how to sell pi coins effectively (from 50 - 100k  pi)
how to sell pi coins effectively (from 50 - 100k pi)
DOT TECH
 
一比一原版UOL毕业证利物浦大学毕业证成绩单如何办理
一比一原版UOL毕业证利物浦大学毕业证成绩单如何办理一比一原版UOL毕业证利物浦大学毕业证成绩单如何办理
一比一原版UOL毕业证利物浦大学毕业证成绩单如何办理
ydubwyt
 
how to sell pi coins in all Africa Countries.
how to sell pi coins in all Africa Countries.how to sell pi coins in all Africa Countries.
how to sell pi coins in all Africa Countries.
DOT TECH
 
innovative-invoice-discounting-platforms-in-india-empowering-retail-investors...
innovative-invoice-discounting-platforms-in-india-empowering-retail-investors...innovative-invoice-discounting-platforms-in-india-empowering-retail-investors...
innovative-invoice-discounting-platforms-in-india-empowering-retail-investors...
Falcon Invoice Discounting
 
What website can I sell pi coins securely.
What website can I sell pi coins securely.What website can I sell pi coins securely.
What website can I sell pi coins securely.
DOT TECH
 
655264371-checkpoint-science-past-papers-april-2023.pdf
655264371-checkpoint-science-past-papers-april-2023.pdf655264371-checkpoint-science-past-papers-april-2023.pdf
655264371-checkpoint-science-past-papers-april-2023.pdf
morearsh02
 
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Card
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit CardPoonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Card
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Card
nickysharmasucks
 
how can I sell my pi coins for cash in a pi APP
how can I sell my pi coins for cash in a pi APPhow can I sell my pi coins for cash in a pi APP
how can I sell my pi coins for cash in a pi APP
DOT TECH
 
Intro_Economics_ GPresentation Week 4.pptx
Intro_Economics_ GPresentation Week 4.pptxIntro_Economics_ GPresentation Week 4.pptx
Intro_Economics_ GPresentation Week 4.pptx
shetivia
 
Chương 6. Ancol - phenol - ether (1).pdf
Chương 6. Ancol - phenol - ether (1).pdfChương 6. Ancol - phenol - ether (1).pdf
Chương 6. Ancol - phenol - ether (1).pdf
va2132004
 
Falcon Invoice Discounting: Optimizing Returns with Minimal Risk
Falcon Invoice Discounting: Optimizing Returns with Minimal RiskFalcon Invoice Discounting: Optimizing Returns with Minimal Risk
Falcon Invoice Discounting: Optimizing Returns with Minimal Risk
Falcon Invoice Discounting
 
Introduction to Indian Financial System ()
Introduction to Indian Financial System ()Introduction to Indian Financial System ()
Introduction to Indian Financial System ()
Avanish Goel
 
Webinar Exploring DORA for Fintechs - Simont Braun
Webinar Exploring DORA for Fintechs - Simont BraunWebinar Exploring DORA for Fintechs - Simont Braun
Webinar Exploring DORA for Fintechs - Simont Braun
FinTech Belgium
 
The new type of smart, sustainable entrepreneurship and the next day | Europe...
The new type of smart, sustainable entrepreneurship and the next day | Europe...The new type of smart, sustainable entrepreneurship and the next day | Europe...
The new type of smart, sustainable entrepreneurship and the next day | Europe...
Antonis Zairis
 
NO1 Uk Black Magic Specialist Expert In Sahiwal, Okara, Hafizabad, Mandi Bah...
NO1 Uk Black Magic Specialist Expert In Sahiwal, Okara, Hafizabad,  Mandi Bah...NO1 Uk Black Magic Specialist Expert In Sahiwal, Okara, Hafizabad,  Mandi Bah...
NO1 Uk Black Magic Specialist Expert In Sahiwal, Okara, Hafizabad, Mandi Bah...
Amil Baba Dawood bangali
 
what is a pi whale and how to access one.
what is a pi whale and how to access one.what is a pi whale and how to access one.
what is a pi whale and how to access one.
DOT TECH
 
how to swap pi coins to foreign currency withdrawable.
how to swap pi coins to foreign currency withdrawable.how to swap pi coins to foreign currency withdrawable.
how to swap pi coins to foreign currency withdrawable.
DOT TECH
 
一比一原版BCU毕业证伯明翰城市大学毕业证成绩单如何办理
一比一原版BCU毕业证伯明翰城市大学毕业证成绩单如何办理一比一原版BCU毕业证伯明翰城市大学毕业证成绩单如何办理
一比一原版BCU毕业证伯明翰城市大学毕业证成绩单如何办理
ydubwyt
 
what is the future of Pi Network currency.
what is the future of Pi Network currency.what is the future of Pi Network currency.
what is the future of Pi Network currency.
DOT TECH
 
The European Unemployment Puzzle: implications from population aging
The European Unemployment Puzzle: implications from population agingThe European Unemployment Puzzle: implications from population aging
The European Unemployment Puzzle: implications from population aging
GRAPE
 

Recently uploaded (20)

how to sell pi coins effectively (from 50 - 100k pi)
how to sell pi coins effectively (from 50 - 100k  pi)how to sell pi coins effectively (from 50 - 100k  pi)
how to sell pi coins effectively (from 50 - 100k pi)
 
一比一原版UOL毕业证利物浦大学毕业证成绩单如何办理
一比一原版UOL毕业证利物浦大学毕业证成绩单如何办理一比一原版UOL毕业证利物浦大学毕业证成绩单如何办理
一比一原版UOL毕业证利物浦大学毕业证成绩单如何办理
 
how to sell pi coins in all Africa Countries.
how to sell pi coins in all Africa Countries.how to sell pi coins in all Africa Countries.
how to sell pi coins in all Africa Countries.
 
innovative-invoice-discounting-platforms-in-india-empowering-retail-investors...
innovative-invoice-discounting-platforms-in-india-empowering-retail-investors...innovative-invoice-discounting-platforms-in-india-empowering-retail-investors...
innovative-invoice-discounting-platforms-in-india-empowering-retail-investors...
 
What website can I sell pi coins securely.
What website can I sell pi coins securely.What website can I sell pi coins securely.
What website can I sell pi coins securely.
 
655264371-checkpoint-science-past-papers-april-2023.pdf
655264371-checkpoint-science-past-papers-april-2023.pdf655264371-checkpoint-science-past-papers-april-2023.pdf
655264371-checkpoint-science-past-papers-april-2023.pdf
 
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Card
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit CardPoonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Card
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Card
 
how can I sell my pi coins for cash in a pi APP
how can I sell my pi coins for cash in a pi APPhow can I sell my pi coins for cash in a pi APP
how can I sell my pi coins for cash in a pi APP
 
Intro_Economics_ GPresentation Week 4.pptx
Intro_Economics_ GPresentation Week 4.pptxIntro_Economics_ GPresentation Week 4.pptx
Intro_Economics_ GPresentation Week 4.pptx
 
Chương 6. Ancol - phenol - ether (1).pdf
Chương 6. Ancol - phenol - ether (1).pdfChương 6. Ancol - phenol - ether (1).pdf
Chương 6. Ancol - phenol - ether (1).pdf
 
Falcon Invoice Discounting: Optimizing Returns with Minimal Risk
Falcon Invoice Discounting: Optimizing Returns with Minimal RiskFalcon Invoice Discounting: Optimizing Returns with Minimal Risk
Falcon Invoice Discounting: Optimizing Returns with Minimal Risk
 
Introduction to Indian Financial System ()
Introduction to Indian Financial System ()Introduction to Indian Financial System ()
Introduction to Indian Financial System ()
 
Webinar Exploring DORA for Fintechs - Simont Braun
Webinar Exploring DORA for Fintechs - Simont BraunWebinar Exploring DORA for Fintechs - Simont Braun
Webinar Exploring DORA for Fintechs - Simont Braun
 
The new type of smart, sustainable entrepreneurship and the next day | Europe...
The new type of smart, sustainable entrepreneurship and the next day | Europe...The new type of smart, sustainable entrepreneurship and the next day | Europe...
The new type of smart, sustainable entrepreneurship and the next day | Europe...
 
NO1 Uk Black Magic Specialist Expert In Sahiwal, Okara, Hafizabad, Mandi Bah...
NO1 Uk Black Magic Specialist Expert In Sahiwal, Okara, Hafizabad,  Mandi Bah...NO1 Uk Black Magic Specialist Expert In Sahiwal, Okara, Hafizabad,  Mandi Bah...
NO1 Uk Black Magic Specialist Expert In Sahiwal, Okara, Hafizabad, Mandi Bah...
 
what is a pi whale and how to access one.
what is a pi whale and how to access one.what is a pi whale and how to access one.
what is a pi whale and how to access one.
 
how to swap pi coins to foreign currency withdrawable.
how to swap pi coins to foreign currency withdrawable.how to swap pi coins to foreign currency withdrawable.
how to swap pi coins to foreign currency withdrawable.
 
一比一原版BCU毕业证伯明翰城市大学毕业证成绩单如何办理
一比一原版BCU毕业证伯明翰城市大学毕业证成绩单如何办理一比一原版BCU毕业证伯明翰城市大学毕业证成绩单如何办理
一比一原版BCU毕业证伯明翰城市大学毕业证成绩单如何办理
 
what is the future of Pi Network currency.
what is the future of Pi Network currency.what is the future of Pi Network currency.
what is the future of Pi Network currency.
 
The European Unemployment Puzzle: implications from population aging
The European Unemployment Puzzle: implications from population agingThe European Unemployment Puzzle: implications from population aging
The European Unemployment Puzzle: implications from population aging
 

002 Hedging With Futures

  • 1. The Derivatives HEDGING WITH FUTURES SKOOL COMPUTER EDUCATION
  • 2.
  • 3.
  • 4.
  • 5.
  • 6.
  • 7.
  • 8.
  • 9.
  • 10.
  • 11. IMM 3-MONTH EURODOLLAR FUTURES CONTRACT EXAMPLE OF FUTURES CONTRACT STANDARDIZED TERMS Cash settled Delivery: The second London bank business day immediately preceding the third Wednesday of the contract month Last trading day: 7:20 a.m. – 2:00 p.m. (Chicago time), Mon. – Fri, except on the last trading day of an expiration contract, when trading closes at 9:30 a.m. (3:30 p.m. London time). The contract also trades on the Globex  system Trading Hours: March, June, September, December; Serial Months, Spot Month Contract Months No limit Daily Price Limit: Eurodollar time deposit having a principal of $1 million with a 3-month maturity Trading Unit:
  • 12. HENRY HUB NATURE GAS FUTURES EXAMPLE OF FUTURES CONTRACT STANDARDIZED TERMS Pipeline specifications in effect at the time of deliver Quality Specifications No earlier than the first calendar day of the delivery month and must be completed no later than the last calendar day of the delivery month. Delivery Period: Sabine Pipe Line Co.’s Henry Hub in LA. Seller is responsible for movement of gas through the Hub; the buyer from the Hub. Hub fee paid by the seller. Delivery Three business days prior to the first calendar month day of the delivery month Last trading day: 10:00 a.m. – 3:10 p.m. (NY time), Mon. – Fri, for any open outcry session. After-hours trading is conducted via NYMEX ACCESS  electronic trading system from 4:00 – 7:00 p.m., Monday through Thursday Trading Hours: 36 consecutive months commencing with the next calendar month Contract Months $1.50 per MMBtu ($15,000 per contract) for first 2 months. Initial back month limits of $0.15 per MMBtu rise to $0.3 per MMBtu if the previous day’s settlement price in any back month is at $0.15 limit Daily Price Limit: Dollars and cents per MMBtu Price Quotation: 10,000 million British Thermal Units (MMBtu) Trading Unit:
  • 13.
  • 14.
  • 15.
  • 16.
  • 17.
  • 18.
  • 19.
  • 20.
  • 21.
  • 22.
  • 23.
  • 24.
  • 26. A POSSIBLE OUTCOME Daily Cumulative Margin Futures Gain Gain Account Margin Price (Loss) (Loss) Balance Call Day (US$) (US$) (US$) (US$) (US$) 400.00 4,000 5-Jun 397.00 (600) (600) 3,400 0 . . . . . . . . . . . . . . . . . . 13-Jun 393.30 (420) (1,340) 2,660 1,340 . . . . . . . . . . . . . . . . . 19-Jun 387.00 (1,140) (2,600) 2,740 1,260 . . . . . . . . . . . . . . . . . . 26-Jun 392.30 260 (1,540) 5,060 0 + = 4,000 3,000 + = 4,000 <
  • 27.
  • 28.
  • 29.
  • 30.
  • 31.
  • 32.
  • 33.
  • 34.
  • 35.
  • 36.
  • 37.
  • 38.
  • 39.
  • 40.
  • 41.
  • 42. OPTIMAL HEDGE RATIO Proportion of the exposure that should optimally be hedged is where  S is the standard deviation of  S , the change in the spot price during the hedging period,  F is the standard deviation of  F , the change in the futures price during the hedging period  is the coefficient of correlation between  S and  F .
  • 43.
  • 44.
  • 45.
  • 46.
  • 47. ROLLING THE HEDGE Another Possibility
  • 48. ROLLING THE HEDGE Another Possibility