Edit phone in the Hedging Agreement

Aug 6th, 2022
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How to edit phone in the Hedging Agreement

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if if you own or work for an old producing company you know that youre going to produce uh crude oil over time you know that youre going to have production in april may youre going to have production in november december and but youre concerned about the price if price goes up then you will make more money if price go down you will lose and also on the other side lets say you own an old refinery you know you you are going to need crude oil for november for december so you have to buy that you have to pay for that if price go up you start losing money if price go down you make money fortunately but thats not all always the case so uh thats where hedging is going to help to reduce the risk and medicate mitigate and uh at some sometimes removing the risk so what you can do is you can go to the to to the financial market to the nymex and get the futures uh contract for delivery in november uh or december whenever you want it if thats the crude oil uh producing company you know you

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In simple terms, a hedging agreement is a contractual arrangement between two parties that is designed to reduce or eliminate the risk associated with a particular financial asset or investment.
Hedging is an advanced risk management strategy that involves buying or selling an investment to potentially help reduce the risk of loss of an existing position.
A classic example of hedging involves a wheat farmer and the wheat futures market. The farmer plants his seeds in the spring and sells his harvest in the fall. In the intervening months, the farmer is subject to the price risk that wheat will be lower in the fall than it is now.
Purchasing insurance against property losses, using derivatives such as options or futures to offset losses in underlying investment assets, or opening new foreign exchange positions to limit losses from fluctuations in existing currency holdings while retaining some upside potential are all examples of hedging.
Hedging arrangement refers to an investment whose aim is to reduce the level of future risks in the event of an adverse price movement of an asset. Hedging provides a sort of insurance cover to protect against losses from an investment.

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