Forex Digest

Surely if you make a trade that the share will go both up and down wouldn't the profit potential cancel out also ?

<<<if you make a trade that the share will go both up and down wouldn't the profit potential cancel out also ?>>>

If you hedged a long share position in a company with a short share position in the same company, or if you hedged a short share position in a company with a long share position in the same company, you are correct that the two positions would cancel out each other, eliminating the possibility of profit or loss. Consequently, almost no one hedges that way.

<<<How does Hedging Work when buying Shares ?>>>

There are many differet ways of hedging. One way is to hedge one stock with another. For example, assume I think XYZ will outperform the market, (as measured by the S&P 500) but I don't know if the market will go up or down. So I could buy $1,000 worth of the stock and short $1,000 worth of SPY. If SPY goes up 8% and XYZ goes up 10%, I make $20. If SPY goes down 10% and XYZ goes down 8%, I make $20. I would have hedged the market risk, but
(1) I would give up much of my potential gain if the stock goes up and
(2) I would lose money if I was wrong and the market outperformed the stock.

A more common way to hedge is to use options. The most straight forward way to hedge with options is to buy a put option. Buying a put option gives me the right, but not the obligation, to sell the stock for a fixed price for a fixed amount of time. For example, assume I bought 100 shares of XYZ at $50 per share. As a hedge I might buy one put option with a strike price of $45 and expiration in July. Assume the option cost $1 per share. Since I can now sell the stock for $45, the most I can lose before the option expires is $6 per share. ($50 - $45 + the $1 I paid for the option.) However, if the stock goes up my potential profit is unlimited.

Obviously this only touches the surface. There have been entire books written about hadging.

2009-01-13 10:17:10 by Bob

I haven't been able to figure it out. If you invest in two different currency pairs that mirror each other, how does a person expect to make any money, Does anyone know how to do this? which currency pairs do you use and how much can a person hope to earn, percentage wise, in relation to their original investment.
Also I currently use Oanda any problems I should know about regarding this broker?

Thanks in advance

This is a position or a combination of positions that helps to reduce the risks of your primary position. Example: you own a stock and you sell a futures contract that ensure you will [later] sell your stock at a set price. By doing this, you avoid any Stock Market fluctuations and you do not lose any money.
http://www.NecessaryInfo.info/Forex_Glos sary_of_Terms-H-I.html

2008-04-03 14:17:22 by kerr to u

Planted a fortune in hedges only to give next doors hoses and sheep a good feed. Fences only work for so long - don't want the place to look like colditz.

If you want a traditional hedge, go for blackthorn - it is very dense and has the advantage of producing white blossom in the spring and a crop of Sloes in the autumn (so you can make your own sloe gin). A more cultivated alternative would be Pyracantha - take a look at this pic - http://www.english-country-garden.com/fl owers/pyracantha.htm - It has the advantage of being evergreen with glossy green leaves (which may be an important consideration) and has white flowers followed by scarlet and orange berries that wild birds love. Deer also avoid it!

Both are seriously thorny.

Whatever you choose, you will need some way to protect them whilst they are young - they will otherwise just get grazed off (young shoots of almost any plants are seemingly irresistible to sheep and horses).

2007-11-11 04:29:24 by sophie d

Hi everyone,

I am looking for hedging or trees in order to use in a field for horses.
Therefore they need to be poisonous free, fast growing and dense in order to be used as a windbreak and privacy.

I will require 120 metres therefore if anyone knows of any plants or websites I would be very glad to hear from you.

Many thanks

Nick

Hawthorn . holly and blackthorn are good as they grow dense - but not blackthorn if the horses can get into the hedge as punctures from the spines can go septic. Hazel is quick too but horses will eat it - no harm to them but you need to protect it until established. You get one year old plants, they are less than a £ each in bulk, try www.hopesgrovenurseries.co.uk or www.glebe-farm-hedging.co.uk
mine grew into a decent hedge in 3 years - not really thick yet, but 5ft tall and you certainly couldn't push through it

2008-12-14 09:26:39 by nickbougourd

I hear people talking about Leaps and how it's a great way to hedge an investment. What is a Leap and how does it work?

Leap means Long Term Equity Anticipation Security. Its pretty much like a stock option but with a longer time horizon. For example A stock option usually expires within 12 months, leaps on the other hand may not expire for years. They are a form of derivative. If your not sure how a stock option works ill explain. In finance, an option is a contract between a buyer and a seller that gives the buyer the right—but not the obligation—to buy or to sell a particular asset (the underlying asset) at a later day at an agreed price. In return for granting the option, the seller collects a payment (the premium) from the buyer. So like for me I like buying options with a 9 month expiration, and if the stock or underlying asset goes up in value before that expiration date I make money, but once that date hits my option expires and Im just out. Leaps operate exactly the same way. Its pretty much you want to make money off a stock that you think will go up in value over a few years but you dont want to risk the amount it would take to buy all those shares....... Hope that helped.

2009-09-09 15:31:22 by Phil