Q: how a farmer naturally short in the spot market? Should not be long, since he is expecting the price of his harvest to go up. Thus, buying today in lower rates in spot market and selling high in future market. Should not be this the case?
you explained this concept in a clear, concise and very straightforward manner. you explained something in 24 minutes that took 3 hours for my professor to explain.
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Splendid explanation, could you verify that in the case of 'LONG' hedge, the futures are always bought with fixed price, which implies that an opportunity cost might incur if the prices are lower than expected? In a nutshell, the LONG hedge does not cover the downside unlike the SHORT hedge which covers upside and downside, since the Producer owns an asset which will reap the benefits from price rise and offset the loss of the 'short sold' futures and vice versa. When we do not own the asset, the only solution is to buy this asset via Future contract and hedge the upside. But if price of the same asset is traded at a discount, then we will encounter the oppoortunity cost of already having bought something at a higher price.
Glad it was helpful! If you like our video lessons, it would be appreciated if you could take 2 minutes of your time to leave us a review here: trustpilot.com/review/analystprep.com
Thank you very much for the vdo! I love how you can explain my one semester Derivatives course into 24 mins clip. By the way, I have a question on using stock index futures to hedge our stock portfolio. Because in the spot market of holding stock portfolio, we will benefit if the price go up so we hedge by short futures to reduce the loss just in case if the stock market price goes down right? So what about long futures, how can we use it with our stock portfolio? Thank you in advance. ☺️🙏🏼
Q: how a farmer naturally short in the spot market?
Should not be long, since he is expecting the price of his harvest to go up. Thus, buying today in lower rates in spot market and selling high in future market. Should not be this the case?
kjmkm
you explained this concept in a clear, concise and very straightforward manner. you explained something in 24 minutes that took 3 hours for my professor to explain.
Glad you enjoyed it! If you like our video lessons, it would be helpful to spread the word if you could leave us a review here: www.trustpilot.com/review/analystprep.com
Love your content, that this is free blows my mind! I hope you are well rewarded in the markets my friend!
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Thank you Prof. James Forjan for these tutorials. Much appreciated.
Glad you like them!
InstaBlaster.
Splendid explanation, could you verify that in the case of 'LONG' hedge, the futures are always bought with fixed price, which implies that an opportunity cost might incur if the prices are lower than expected?
In a nutshell, the LONG hedge does not cover the downside unlike the SHORT hedge which covers upside and downside, since the Producer owns an asset which will reap the benefits from price rise and offset the loss of the 'short sold' futures and vice versa. When we do not own the asset, the only solution is to buy this asset via Future contract and hedge the upside. But if price of the same asset is traded at a discount, then we will encounter the oppoortunity cost of already having bought something at a higher price.
Professor James's humor is unmatched lol
this is very useful for ca final sir thanks
kindly make more and more videos like this
You're welcome!
Great explanation . Love from Nepal
Thanks a ton!
Very well explained with some really nice examples. Thank You!
Glad you enjoyed it!
What an awesome lecture! Respect and Love from India.💐
i found this very helpful - as it was much clearer than text book. thank you
Glad it was helpful! If you like our video lessons, it would be appreciated if you could take 2 minutes of your time to leave us a review here: trustpilot.com/review/analystprep.com
Thank you very much for the vdo! I love how you can explain my one semester Derivatives course into 24 mins clip. By the way, I have a question on using stock index futures to hedge our stock portfolio. Because in the spot market of holding stock portfolio, we will benefit if the price go up so we hedge by short futures to reduce the loss just in case if the stock market price goes down right? So what about long futures, how can we use it with our stock portfolio? Thank you in advance. ☺️🙏🏼