Is hedging Predictable and Profitable?


As one thinks always making a bet on how the pricing of currencies work in different currency markets across the world and maximize the profits, is all about the hedging in Forex, which is again a much-ignored topic in discussions and financial forums. There is a lot of subjects to be delved into to establish that It is all about being predictable enough to make maximum profits in hedging and not the other way around.

In case placing a hedge which lost out money, but still came within the target profit, the revenue earned is locked in the account at a prior date and thus it is not subject to unpredictable variability.

Is it Predictable or Profitable?

For many operating companies which are focused on their core business, hedging mechanism is all but slows the cash flow in the business, rather than making plays on the forex market movements. The scope for stock price motivation for narrowing the cash flow swings in. With a huge benefit for the internal budgeting and forecasting process also usually benefit when the expenditure can be planned based on the fixed profit which is derivable from the hedging rather than a variable amount which limits the expenditure to plan for future investments. Since many companies do not wade much around the speculation pool, hedging becomes a far more viable option to trade during uncertain times.

The real economy people are the ones who are taking the cake and eating it too! As their focus should not deter from their core business like the food chain, IT services etc.In case of projected profits is around 20 % then the bottom line exposure profit should be at least a 5% of what is to be achieved with this forecast. Since preserving the margins should be the prime focus of corporate rather than making a lot of money in all ways. This is not preserved will be immune to any currency moves and just postpone the impact on the currency movements. If the currency rates are hedged and communicated effectively they can become great tools to forecast and managed a foresighted approach on the appropriate responses to accommodate the sudden negative or positive pricing in the future, thus protecting the profits to be made in the near future. Smoothing the volatility in the markets at the correct instance is the prime focus of hedging in particular and minimizing the risk.