Example 2: ABC electronics firms have recently signed an order to supply 5 million U.S. U.S. electronic components in the next few years a model for retailers located abroad in Europe. These components will be built in 6 months for delivery two months after that. ABC instantly understood that they were subjected to two risks. 1. growth and volatile price of copper in 6 months can result in losses to the company. 2. currency fluctuations could easily add to these losses. ABC time young firm can not absorb these losses, given the high market competition from other places. Losses of this order will lead to dismissals, and possibly the closure of enterprises. ABC GTS their phones and following consultations seats to two fences, both for the expiry of the period of 8 months, the delivery date. Hedge # 1 is to buy long $ 5 million From copper to effectively lock in today's price from further price increases. ABC has already eliminated all price risks. The risk of closing the plant exceeds the temptation to increase profits should be copper price fall. In the end, ABC is not in the business speculating in copper prices. Hedge # 2 is to sell short the equivalent of the euro against the U.S. dollars. Since ABC effective EU as a payment, the increase in the dollar and the EU would harm the weak and further undermine profits. The results do not hedge risks and no surprises for ABC in any currency, copper or levels. Free operational risks and full transparency result. At 8 months, so complete, and the customer takes delivery, ABC notify TCU to close the hedge by selling copper and redemption Euro Currency contacts. Many examples exist to demonstrate mitigating risks to financial institutions or portfolio. Dwayne Strocen stated that the new products, constantly created and available on both the opposition and exchange traded markets. If would be advisable to consult with qualified Commodity Trading Advisor or broker to discuss the analysis on a continuing danger management solution only once or hedging. If you are not familiar with Genuine Trading Solutions
