Hedging Transaction

1
Hedging Transaction

• Source of Information NYMEX website
• Document (titled Chapter 2 Typical Hedge
  Transthat explains some of the basics
• www.nymex.com/ath_main.aspx?pg1
• (copy and paste to browser)

2
Hedging Transactions

• Short hedge used by producers of oil to protect
  against a decline in prices
• We will study the example of the short selling
  hedge for crude oil and refined products
• We will omit the examples of short selling hedges
  for natural gas and metals
• Long hedge used by users of oil to protect
  against a rise in prices (we will omit this hedge)

3
Hedging Example - Crude Oil and Refined Products

• Heating oil distributorship that wishes to
  protect the value of its inventory

4
Hedging Example Facts

• We will use the document camera and cover the
  example of the short selling of crude oil and
  refined products which is the first few pages in
  the NYMEX document