Hedging commodity holdings (gold) and all others
If you or your firm and or endowment have a large holding in gold or silver or any other commodity or asset for that matter, It is foolish to not protect that holding, over the past 2 years equity’s and or commodities have had dramatic gains. It does not matter in the context of weather you entered in 10 years ago and are trying to get back to where you where or you entered in two years ago. The gains have to be protected on two levels
One: don’t go back to the losses you incurred in 2008, or the currency erosion you lost or gained from over the past decade
Two: If you have gains don’t give them back, do not fall in love with a metal or equity holding it is very dangerous on many levels.
I understand selling is not an option in many cases, taxes, protection charters act. But there is a very good option to selling, Hedging with options. It is as simple as buying putts in a percent range. But the very skill of the hedge is the ability to roll the derivative in regard to the premium in the proper percent hedge appropriate to the holding NO Computer can handle that. It takes talent and experience and a deep understanding of currency conversion and erosion risk, percent change over time management and the Knowledge of the trade in the options markets, bid ask expirations are not created or traded equal.
DON’T BE FOOLISH, panic is never the answer ask the panicers about the selling at Dow 7000. Not so good.
Kevin d. Blanch 1/27/11