on corporate hedging
Apr. 24th, 2010 12:24 pmwhich is kinda like putting a chip on 0 and 00 as well as your normal "25-36" bet.
Adam Smith's Money World - Hedged Into a Corner:
Adam Smith's Money World - Hedged Into a Corner:
Another version of hedging is used to control the costs of commodities that are consumed in the process of doing business. Southwest Airlines is a master of this technique. Unlike investors, who can always wait on the sidelines sitting on their money, air carriers have to follow a schedule and that schedule burns jet fuel. So Southwest hedges its fuel costs by placing countervailing bets on companies, for example, that would benefit greatly from oil price increases. If oil goes up jet fuel becomes more expensive, but if you’ve also invested in oil drilling companies those would rise in value, too, with rising oil and that capital gain would counterbalance the increased cost of fuel.