Wholesale Stated Income Programs

A marijuana industry group recently reported the sensational headline that Colorado had taken in a halfbillion dollars in pot taxes since recreational stores opened. Wholesale Stated Income Programs' title='Wholesale Stated Income Programs' />Hedge finance Wikipedia. A hedge is an investment position intended to offset potential losses or gains that may be incurred by a companion investment. In simple language, a hedge is used to reduce any substantial losses or gains suffered by an individual or an organization. A hedge can be constructed from many types of financial instruments, including stocks, exchange traded funds, insurance, forward contracts, swaps, options, gambles,1 many types of over the counter and derivative products, and futures contracts. Public futures markets were established in the 1. Wholesale Stated Income Programs' title='Wholesale Stated Income Programs' />EtymologyeditHedging is the practice of taking a position in one market to offset and balance against the risk adopted by assuming a position in a contrary or opposing market or investment. The word hedge is from Old English hecg, originally any fence, living or artificial. The use of the word as a verb in the sense of dodge, evade is first recorded in the 1. ExampleseditAgricultural commodity price hedgingeditA typical hedger might be a commercial farmer. The market values of wheat and other crops fluctuate constantly as supply and demand for them vary, with occasional large moves in either direction. Based on current prices and forecast levels at harvest time, the farmer might decide that planting wheat is a good idea one season, but the price of wheat might change over time. Wholesale Stated Income Programs' title='Wholesale Stated Income Programs' />Scraping By On 500,000 A Year Why Its So Hard For High Income Earners To Escape The Rat Race. Posted by Financial Samurai 553 Comments. Once the farmer plants wheat, he is committed to it for an entire growing season. Hotspot Shield Keygen. If the actual price of wheat rises greatly between planting and harvest, the farmer stands to make a lot of unexpected money, but if the actual price drops by harvest time, he is going to lose the invested money. Due to the uncertainty of future supply and demand fluctuations, and the price risk imposed on the farmer, said farmer may use different financial transactions to reduce, or hedge, their risk. One such transaction is the use of forward contracts. Forward contracts are mutual agreements to deliver a certain amount of a commodity at a certain date for a specified price and each contract is unique to the buyer and seller. For this example, the farmer can sell a number of forward contracts equivalent to the amount of wheat he expects to harvest and essentially lock in the current price of wheat. Once the forward contracts expire, the farmer will harvest the wheat and deliver it to the buyer at the price agreed to in the forward contract. Therefore, the farmer has reduced his risks to fluctuations in the market of wheat because he has already guaranteed a certain number of bushels for a certain price. However, there are still many risks associated with this type of hedge. For example, if the farmer has a low yield year and he harvests less than the amount specified in the forward contracts, he must purchase the bushels elsewhere in order to fill the contract. This becomes even more of a problem when the lower yields affect the entire wheat industry and the price of wheat increases due to supply and demand pressures. Also, while the farmer hedged all of the risks of a price decrease away by locking in the price with a forward contract, he also gives up the right to the benefits of a price increase. Another risk associated with the forward contract is the risk of default or renegotiation. The forward contract locks in a certain amount and price at a certain future date. Because of that, there is always the possibility that the buyer will not pay the amount required at the end of the contract or that the buyer will try to renegotiate the contract before it expires. Future contracts are another way our farmer can hedge his risk without a few of the risks that forward contracts have. Future contracts are similar to forward contracts except they are more standardized i. These contracts trade on exchanges and are guaranteed through clearinghouses. Clearinghouses ensure that every contract is honored and they take the opposite side of every contract. Future contracts typically are more liquid than forward contracts and move with the market. Because of this, the farmer can minimize the risk he faces in the future through the selling of future contracts. Future contracts also differ from forward contracts in that delivery never happens. The exchanges and clearinghouses allow the buyer or seller to leave the contract early and cash out. So tying back into the farmer selling his wheat at a future date, he will sell short futures contracts for the amount that he predicts to harvest to protect against a price decrease. The current spot price of wheat and the price of the futures contracts for wheat converge as time gets closer to the delivery date, so in order to make money on the hedge, the farmer must close out his position earlier than then. On the chance that prices decrease in the future, the farmer will make a profit on his short position in the futures market which offsets any decrease in revenues from the spot market for wheat. On the other hand, if prices increase, the farmer will generate a loss on the futures market which is offset by an increase in revenues on the spot market for wheat. Instead of agreeing to sell his wheat to one person on a set date, the farmer will just buy and sell futures on an exchange and then sell his wheat wherever he wants once he harvests it. Hedging a stock priceeditA common hedging technique used in the financial industry is the longshort equity technique. A stock trader believes that the stock price of Company A will rise over the next month, due to the companys new and efficient method of producing widgets. He wants to buy Company A shares to profit from their expected price increase, as he believes that shares are currently underpriced. But Company A is part of a highly volatile widget industry. So there is a risk of a future event that affects stock prices across the whole industry, including the stock of Company A along with all other companies. Since the trader is interested in the specific company, rather than the entire industry, he wants to hedge out the industry related risk by short selling an equal value of shares from Company As direct, yet weaker competitor, Company B. The first day the traders portfolio is Long 1,0. Company A at 1 each. Short 5. 00 shares of Company B at 2 each. The trader has sold short the same value of shares the value, number of shares price, is 1. If the trader was able to short sell an asset whose price had a mathematically defined relation with Company As stock price for example a put option on Company A shares, the trade might be essentially riskless. In this case, the risk would be limited to the put options premium. On the second day, a favorable news story about the widgets industry is published and the value of all widgets stock goes up. Company A, however, because it is a stronger company, increases by 1. Company B increases by just 5 Long 1,0. Company A at 1. 1. Short 5. 00 shares of Company B at 2. The trader might regret the hedge on day two, since it reduced the profits on the Company A position. But on the third day, an unfavorable news story is published about the health effects of widgets, and all widgets stocks crash 5. Nevertheless, since Company A is the better company, it suffers less than Company B Value of long position Company A Day 1 1,0. Day 2 1,1. 00. Day 3 5. Value of short position Company B Day 1 1,0. Day 2 1,0. 50. Day 3 5. Without the hedge, the trader would have lost 4.