Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Display:
A real hedger doesn't lose.

Thanks, exactly what I wanted Chris to ackowledge.

"It's the statue, man, The Statue."

by Migeru (migeru at eurotrib dot com) on Tue Mar 27th, 2007 at 05:14:50 AM EST
[ Parent ]
So if I buy an option that is overpriced because the volatility is entirely manufactured then I haven't lost?

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Tue Mar 27th, 2007 at 07:26:42 AM EST
[ Parent ]
A real hedger SHOULDN'T lose for sure.

But the real hedgers don't have the advantages of the guys sitting in the middle in terms of access to data and order flow.

And if a Big Oil company is in cahoots with a Big Investment Bank - a not unlikely scenario - then other market players can get doubly screwed.

All you have to do is:

(a) add up the profits made by Goldman Sachs, Morgan Stanley energy desks - not to mention BP's trading profits - and ask yourself why the top people in the Banks got where they did; and
(b) why every other investment bank is queuing up to poach energy teams from their competition; and
(c) why star energy traders head for hedge funds, because they don't see why their employer should get so much of the profit THEY are making; and the $64 billion question
(d) at whose expense are these multi billion "super-profits" (I don't begrudge trading profits, by the way) being made?

The answer to that is hedging "end user" producers and consumers, and, increasingly, hedge funds.


"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue Mar 27th, 2007 at 07:42:50 AM EST
[ Parent ]
though I've tried a number of times.  
by HiD on Tue Mar 27th, 2007 at 05:24:26 PM EST
[ Parent ]

Display:

Occasional Series