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Question about hedging

  • 02-04-2016 1:52pm
    #1
    spaceman902
    Registered Users, Registered Users 2 Posts: 3 ✭


    Howdy All,

    I'm pretty new to investing, I have been thinking about taking a more active approach for the last few years, and finally bit the bullet this year and opened a brokerage account. I have a buy and hold type account with etrade (solely for stocks i buy through ESPP) but opened up an ac with degiro and wired 10k there.

    After making a few small investments, mostly bad but some good, I have started looking more at accounting, 10-k's etc, with the hope of understanding more about forecasting revenue, or at least being able to compare companies in a sector.

    I am currently spending some time trying to understand the oil industry, as it seems to have a fundamental effect on nearly everything else

    I'm trying to project some revenue for an oil company at the minute and having a bit of trouble projecting the hedged price of oil when using a costless three way collar. Would anyone here be able to interpret the hedged price per oil after with the following three way collar, and list the formulae you use? e.g. oil price is 45

    basic fixed price: 85.00
    floor long: 65.00
    short put 95.00
    ceiling short: 96.50

    I spent many hours last night trying to understand this, but am still confused :)

    Looking forward to getting into this, I think i finally found the ultimate hobby :)


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