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Hedging Importance |  | |||
| Critical | Disruptive | Annoying | Immaterial | |
Price's Effect on Financials | Small price moves have outsized consequences | Commodity prices can interfere with budget goals | Achievable goals are not met; Profit disappointments | Low Impact, even if prices change |
Hedging Goal | Certainty and Precision | Defend a set price | Hedges as "insurance policies" | Opportunism |
Popular Hedging Tactics | Swaps (for Fixed Price) | Probabilistic and Adjustment | Call Options (Consumer) Put Options (Producer) | Limit Orders |
Should I Hedge? | Start Immediately! | Yes Actively Manage | Yes Infrequently | No |
Hedging should be done with a goal in mind; that goal is a combination of hedges that efficiently remove risk and keep your financial goals attainable.
| Do prices vary on the commodities integral to my business? | ||
 | YES | |
| Does price volatility threaten my financial goals? | ||
| YES | |
| Can my goals be quantified in financial metrics? | ||
| YES | |
| Hedging could be right for you. |