Oil price hedging...

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  #41  
alvrb211's Avatar
alvrb211 , 10-17-2008 05:46 PM
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Quote:
Originally Posted by 767pilot
I guess that with a hedge there is always a chance that you bet wrong and lose it all. You lose the upside of a hedge, but also the downside risk is illiminated
Exactly!

VolksWagen lost millions because they took a gamble with hedges. It turned out to be a very big mistake indeed. It could have gone the other way completely but that's the gamble.

AL
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  #42  
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Lloyd Bonafide , 10-17-2008 05:52 PM
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Quote:
Originally Posted by alvrb211
Exactly!

VolksWagen lost millions because they took a gamble with hedges. It turned out to be a very big mistake indeed. It could have gone the other way completely but that's the gamble.

AL
Think of hedging as insurance. The only downside is the cost of the hedge. Lots of upside as seen with WN over the past two years. Forget their profit/loss, concentrate on their cash flow.

- LLoyd
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