Derivatives: Darth Vader's Revenge Message Board

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Non-Tech : Derivatives: Darth Vader's Revenge

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To: Henry Volquardsen who wrote (965)	10/14/1999 12:39:00 PM
From: Michael Friesen	Read Replies (1) of 2794

Re: gold mining companies losing $$$ According to the Globe & Mail here, most of the companies in trouble did something called a 'delta hedge.' What that consists of is buying 1 put to sell their future production, and then selling 2 higher out of the money calls to pay for the put. For a while this seemed like a surefire thing. For a while. As the gold price started to rise, the "delta hedge" thus became a net short position. That's a lesson to me if I ever listen to anyone trying to sell me insurance that doesn't cost anything!

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