Five options structures for hedging | InHedge

Every time a treasurer or CFO requests a quote from a bank to hedge natural gas, aluminum, or any other Commodity, the first question should not be how much the premium costs but which structure actually protects the company’s risk. Financial options offer enormous flexibility for designing hedges, but the choice of structure defines the cost, the effective protection, and the residual exposure that stays on the balance sheet.
This guide summarizes the five most used options structures in the OTC market, their advantages, their drawbacks, and the variables the finance team must review before…