Indices DJIA S&P 500 DAX 30 Nasdaq 100 Nasdaq Comp Nikkei 225 FTSE 100 SMI DJ Stoxx 50 CAC 40 Hang Seng Kospi Nyse Comp AMEX   -     -     -     -     -     -     -     -     -     -     -     -     -     -   10742.1 Warning: simplexml_load_file() [function.simplexml-load-file]: /home/adcittac/public_html/fx-track/data.txt.bak:1: parser error : Document is empty in /home/adcittac/public_html/fx-track/data.php on line 2 Warning: simplexml_load_file() [function.simplexml-load-file]: in /home/adcittac/public_html/fx-track/data.php on line 2 Warning: simplexml_load_file() [function.simplexml-load-file]: ^ in /home/adcittac/public_html/fx-track/data.php on line 2 Warning: simplexml_load_file() [function.simplexml-load-file]: /home/adcittac/public_html/fx-track/data.txt.bak:1: parser error : Start tag expected, '<' not found in /home/adcittac/public_html/fx-track/data.php on line 2 Warning: simplexml_load_file() [function.simplexml-load-file]: in /home/adcittac/public_html/fx-track/data.php 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/home/adcittac/public_html/fx-track/data.php on line 2 Warning: simplexml_load_file() [function.simplexml-load-file]: <ITEM NAME="QQQQ" in /home/adcittac/public_html/fx-track/data.php on line 2 Warning: simplexml_load_file() [function.simplexml-load-file]: ^ in /home/adcittac/public_html/fx-track/data.php on line 2 Warning: Invalid argument supplied for foreach() in /home/adcittac/public_html/fx-track/data.php on line 3 5647.8 6888.8 2895.7 5974.5 21388.9 1686.1 7387 1876.1 Commodites Light Crude Oil Brent Crude Copper Gold Pallad Platinum Silver Dow Diamonds QQQQ   -     -     -     -     -     -     -     -     -   80.68 80.14 277.6 1106.56 464 1602.01 16.93 107.34 47.48 Last update: 20-03-2010 01:59:00 (GMT - Live)

Example 1 - Crude Oil Producer's Short Hedge Introduction Example 1 - Crude Oil Producer's Short Hedge Example 2 - Electricity Producer Fears a Price Decline Example 3 - Petroleum Marketer's Long Hedge, Rising and Falling Markets Strip Trades Spread Trades A crude oil producer agrees to sell 30,000 barrels a month for each of six months at the posted prices prevailing at delivery. When he agrees to the deal, posted prices are $20.50 a barrel, but as market conditions appear to be weakening, he wants to protect his revenues against a decline, and executes a short hedge. The example shows how the producer’s revenue is protected from the full brunt of a declining market. In this example, the oil producer establishes hedges for the second, third, fourth, fifth, sixth, and seventh contract months against his production during the first, second, third, fourth, fifth, and sixth months ahead. Near-month futures positions are liquidated after a price posting is established (normally on the first day of the calendar month). In a surplus crude market, spot prices generally fall faster than postings, regardless of whether prices decline more slowly, as in Case 1, or more rapidly, as in Case 2 If the producer could not lock in revenue, he could be faced with shutting in all or part of the production. The example shows two possible outcomes. Case 1, with relatively high posted and futures prices, and Case 2, with relatively low posted and futures prices. Short hedges for February, March, April, May, June, and July (against January, February, March, April, May, and June production) are initially established on December 1. Assuming the futures hedge is placed on December 1, the near-month contract is January and the second month out is February. Because the January crude futures contract expires three business days prior to December 24, and the posted prices for January are not finally established until January 2, the example attempts to have the liquidation of the futures coincide with the setting of the posted price. In summary, the nearby contract is used to hedge current production. For example, the February futures contract is utilized to hedge January production because the timing is better matched. Source: