RE:RE:https://www.bnnbloomberg.ca/cenovus-closing-wti-hedges-sees- My post on the cve board.
"OMG, take a breath. Rethink the hysterics. Hedging "losses" are not out of pocket, out of shareholders equity losses like selling oil for less than it costs to produce. There is an offset on the top line that covers the give up on hedges. Hedges work in a multitude of ways but in essence they all give up POTENTIAL upside in exchange for the safety net on the downside. Eg, let's say oil is 100. I hedge my future sales by capping my upside at $110. Ie I sell call options. I use the proceeds to buy put options at say 90. So, in the future, no matter what spot prices trade at, I will get a minimum of $90 , but a maximum of 110. It's all done using contracts. Nobody is delivering a million barrels at your front door or showing up with a mile long train to get filled. So if oil goes to say 130, it will cost me $20 to close the contract. That is reported as a "loss". But in reality, I sell the physical oil at 130, record a "loss" of 20 and net 110. To repeat, oil was $100, it goes up but I "only" get 110 versus 130. But I get 110! I don't actually LOSE anything other than foregone profit."
BLACKJACK86 wrote: one billions dollars loss on hedge