any company operating in the market of financial resources due to the huge risk of losses due to sudden changes in market conditions.The behavior of the market is very difficult to predict, in addition, at any moment, he may be subjected to the influence of factors such as natural disasters, political conflicts and other troubles.Hedging is used by players of the financial market in order to be able to protect yourself as much as possible from getting loss.On how to implement such insurance, we describe in this article.
hedging financial risks can take different forms depending on what goals the trader.One of the most primitive types of hedging is to open two opposing trades on one instrument - thus, the amount of movement of the market, resulting in one transaction, offset by the profits from the same movement on the other transaction.Naturally, this strategy eliminates not only the loss but also the profits, thus substantially reducing both the riskiness and the efficiency of the market.A more sophisticated version of this strategy is the conclusion of transactions with different tools - for example, it is possible to conclude a deal on the shares of a particular company and stock market indices, which also formed taking into account the purchase price of the shares.Naturally, in order to hedge the risk do not take all the profit, the amount of the underlying transaction to exceed the amount of a safety kontrsdelki.Thus, reducing the level of profits in the first stage of the transaction, we also reduce its loss-making until such time until we are sure that we set the desired price trend.After that, a safety deal can be closed, thus increasing the profitability of the operation.
Hedging has other shapes, the most popular of which is the conclusion of transactions with delayed execution of contracts - the so-called forwards.Forward is a contract in which the specified price and date of delivery of the goods, which is generally six to twelve months from the date of signing.Due to this side agree in advance on the purchase and sale of goods under the conditions that satisfy their interests at the moment and in the future they will not worry about changes in the market price for the transaction.The first forward contracts relating to the supply of agricultural products, the prices of which are subject to change due to the effects of natural factors and as a result, changes in the volume of the crop.Standardized view of the forward contract is the so-called futures contract - a contract in which conditions, delivery time and quantity set in advance the exchange rules.
Hedging can be carried out using the purchase options.An option gives its buyer the right (not the obligation, in the case of forward or futures) to buy a certain amount of an asset or after a certain date.This type of contract is most advantageous to the buyer as if the use of the option rights will be to his advantage, his loss will be equal only to the cost of the option.The win-win situation is and the seller - the cost of the option is for him a kind of advance premium for the transaction, which may not take place.
Hedging is an integral part of the strategy of any punter.In a constantly changing market conditions, play the stock market without the risk insurance, like suicide, so kontrsdelki and operations with derivative financial instruments for a significant proportion of financial transactions worldwide.
