RE:RE:Hedgeing oil is like selling your cve stock @ $10.00in CVE case, most of the upside would go to conocophillips as part of the acquisition deal. Have Conocophillips finish selling their CVE shares?
Maxmoe wrote: Your example is very extreme. But yes, theoretically correct. If it costs me $6 a barrel to produce oil and I hedged by selling calls at $10 I'd earn 4 instead of 14 IF it goes to 20. But using the recent oil prices as the context it's more like oil is 100, I hedge my oil price with a cap at $166 (10\6 = 166\100]. Now, would you be in hysterics if oil went to $333 (20/10 = 333/166] and you missed out on this fantasy fairy tale profit for a few months until the hedges wound down? Unlike your stock scenario, cve will be pumping oil at $333 once the hedges run off. They don't run out of production like you can only sell your stock once. And, big AND, cve will be making ungodly amounts of money at 'only' $166 in the few intervening months. Is that calming or do you need to just trade into bell or bmo?
soundandfury wrote: And then the cve stock rises to $20.00..........if your average cost was say $6.00 you made a $4.00 profit but if you had held your shares you would have got $20.00 for a $14.00 profit instead of $4.00 realized profit.................my 2 cents on hedge losses