Hedging Commodities: A practical guide to hedging strategies with futures and options

by Slobodan Jovanovic

Overview

This book is an invaluable resource of hedging case studies and examples, explaining with clarity and coherence how various instruments - such as futures and options - are used in different market scenarios to contain, control and eliminate price risk exposure. Its core objective is to elucidate hedging transactions and provide a systematic, comprehensive view on hedge performance.
When it comes to hedge strategies specifically, great effort has been employed to create new instruments and concepts that will prove to be superior to classic methods and interpretations. The concept of hedge patterns - introduced here - proves it is possible to tabulate a hedging strategy and interpret its use with diagrams, so each example is shown visually with the result of radical clarity.
A compelling visual pattern is also attached to each case study to give you the ability to compare different solutions and apply a best-fit hedging strategy in real-world situations.
A diverse range of hedging transactions showing the ultimate payoff profiles and performance metrics are included. These have been designed to achieve the ultimate goal - to convey the necessary skills to allow business and risk management teams to develop proper hedging mechanisms and apply them in practice.

Product Details

ISBN-13:	9780857193193
Publisher:	Harriman House Publishing
Publication date:	02/03/2014
Pages:	435
Sales rank:	293,879
Product dimensions:	7.90(w) x 9.90(h) x 1.00(d)

About the Author

Slobodan Jovanovic is an experienced trader of non-ferrous and precious metals. Born and educated in Belgrade, his business career started in 1980 at Invest Import, one of the largest export and import companies in former Yugoslavia. He was the first to conclude "Trepca" silver bullions export deals with Philipp Brothers of London, and Intermercur in Zurich. During this period he also became very familiar with hedging concepts and strategies and developed a keen interest in the field of derivatives trading and hedging concepts.
In 1995 he moved to Athens to organise a sales network for another Serbian company and the following year he joined the Mytilineos group of companies, one of the largest non-ferrous traders in South-East Europe. He was promoted and helped conclude the deal with RHMK "Trepca," which was the largest foreign investment in Serbia at that time. In the same period he paved the way for yet another big investment scheme - the strategic alliance between Mytilineos Co. and Bor that resulted in the $1 billion "General Cooperation Agreement" deal. In terms of value, scope and duration this deal dwarfed any previous investment of a single private company in South-East Europe and was immediately labelled by the press as "The Deal of the Century".
Additionally, Jovanovic's work has included the execution of complex business activities related primarily to copper trading, concentrates tolling and cathodes exports. In the course of his professional career he traded non-ferrous metals with some of the most recognised companiesin that field, such as Trafigura, Mark Rich, Glencore, Rusal, Umicore and Norddeutschen Affineire (now Aurubis). Jovanovic became a freelance hedging instructor in 2009. He runs coordination and consultation with intermediaries mainly engaged in non-ferrous metals and the cable industry interested in implementing hedging solutions in their day-to-day operations. Presently, he is engaged in designing short educational seminars on derivatives markets and hedging concepts in real-time context for the Serbian Chamber of Commerce.
This is his first book on derivatives trading, commodities futures and options strategies seen from the trader's viewpoint.

Table of Contents

PREFACE
CORE OBJECTIVES
PART 1. FORWARDS, FUTURES & SWAPS
1. Evolution of Trade: From Physical to Derivative
2. Introduction to Futures
3. Commodity Futures Pricing
4. Hedging Basics
5. Hedge Patterns with Futures
6. Commodity Futures Spreads
7. Basis Controversy
8. Commodity Swaps
PART 2. BASIC FEATURES AND STRATEGIES OF OPTIONS
9. Introduction to Options
10. Basic Directional Trading Using Options
11. Hedge Patterns with Options
12. Typical Equity Hedging Strategies
PART 3. OPTIONS PRICING MODELS
13. Determinants of Options Value
14. European Put & Call Pricing Bounds
15. Black-Scholes Pricing Model
16. Binomial Option Pricing Model
17. Parity Relations
PART 4. ADVANCED HEDGING STRATEGIES
18. Hedging Long Underlying with a Bear Call Spread
19. Hedging Short Underlying with a Bull Call Spread
20. Collars and Fences
21. Conversions and Reversals
22. Covered Short Straddle & Strangle
23. Accrued Profits Protection
PART 5. OPTIONS SPREADS & COMBINATIONS
24. Option Spread Strategies
25. Call Ratio Spreads
26. Put Ratio Spreads
27. Options Combinations
28. Synthetic Instruments
Index