Thread: SWA Hedging
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Old 04-24-2008 | 12:55 AM
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Spanky189
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Joined: Apr 2006
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From: 737/FO
Default SWA Hedging

SWA hedging will not run out. Here's an analogy for some:

When XYZ college places in the top 10 or wins the Rose Bowl, it doesn't mean that they will suck the next year. The college is continually recruiting talent to develope every year. So, last years Juniors may do as well or better (or worse) than the Seniors that graduated.

That is how hedging on heating oil derivatives works.

The recruiters (hedgers) forcast the future ability (profit) of players (heating oil) to continue their success. It's not 100% luck that the same teams stay in the top 10 alot of the time. There are smart guys doing it with the cash to back them.

That's about as basic as it gets. The process is ongoing and will never end. He who recruits the best has the most successful team.

Possible pitfalls to this strategy;

The government hands the other team 14 points (pensions gone).
The oil prices drop.

[I could be wrong and everything is subject to change.]
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