Post by
BayStreetWolfTO on Jun 15, 2021 8:42am
Hedging explained
True cost and opportunity cost certainly get confused.
You don't actually "lose money" on a hedge. That's like saying if my grandson takes a 5 year fixed mortgage rate to hedge "protect " against higher interest rates he is "losing" money at 2.10 versus going with a 5 year variable at 1.59 which can rise.
To say he is losing money on a 5-year fixed term is not how most people think.
Last I checked a big majority of people are conservative and go with fixed rates for certainty.
This is what BTE management is doing. Which is completely a prudent financial decision with the debt. As the debt lessens the hedging can reduce. To suggest they shouldn't hedge is completely irresponsible and would only be suggested by those who don't understand fudicuary duty. Hedgingrefers to buying an investment designed to reduce the risk of losses from another investment. Investors will often buy an opposite investment to do this, such as by using a put option tohedgeagainst losses in a stock position, since a loss in the stock will be somewhat offset by a gain in the option