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Company Money Hedging as part of Brexit/EU referendum

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    Company Money Hedging as part of Brexit/EU referendum

    folks
    it might sound strange, but any ideas to prepare for EU referendum?
    I've got around 30K GBP in my business bank account. I have opened a USD account too also for my business purpose.
    1. Any of you guys hedging as part of EU referendum?
    2. How do you hedge your company's money? I did try out transfer to USD, but bank charged me horrendous rate. It's not worth. Any other options to convert to USD temporarily?
    3. Any other ideas you guys doing from your company's perspective?

    #2
    Depends on what you are trying to hedge against.

    Do you think that 30k is suddenly going to be worth less (or be worthless) in real terms after the referendum? Do you regularly trade in $USD or other foreign currencies?

    Or are you simply trying to speculate on the currency markets in the hope that you can make some money out of it?

    Frankly £30k is not going to net you much profit even if there is a 10 or 15 percent drop in the pound. To make any serious money from it you'd need £300k, preferably of someone else's money.
    "Being nice costs nothing and sometimes gets you extra bacon" - Pondlife.

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      #3
      Hedging against what ? Do you know what hedging means ?
      There are options to buy cheap currency , but why? After all you pay for living in gbp so you don't care if it drops
      Last edited by diseasex; 18 June 2016, 11:54.

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        #4
        With his lack of basic knowledge, it looks like the OP would be wise to leave well alone.
        The Chunt of Chunts.

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          #5
          @both above, why you guys are so arrogant? if you don't know, please do not reply. Please read through currency ETF hedging and I'm well aware of what hedging means

          I was just asking, if you guys are doing anything smart to reduce the risk of GBP going down in case of an exit. for 30K, with 20% change it will be a profit/loss of £6000 which may be huge change for people like me.

          Hoping to see if anyone have done a risk aversion mechanism. that's all

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            #6
            Originally posted by sojan View Post
            @both above, why you guys are so arrogant? if you don't know, please do not reply. Please read through currency ETF hedging and I'm well aware of what hedging means

            I was just asking, if you guys are doing anything smart to reduce the risk of GBP going down in case of an exit. for 30K, with 20% change it will be a profit/loss of £6000 which may be huge change for people like me.

            Hoping to see if anyone have done a risk aversion mechanism. that's all
            so you want to invest and not hedge. Since you've got cash you have nothing to hedge against.
            Likely there will be strong move , but since nobody is sure which way then i think the only "relatively" safe option is to buy call and put options (read about long straddle)
            HTH

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              #7
              Originally posted by sojan View Post
              @both above, why you guys are so arrogant? if you don't know, please do not reply. Please read through currency ETF hedging and I'm well aware of what hedging means

              I was just asking, if you guys are doing anything smart to reduce the risk of GBP going down in case of an exit. for 30K, with 20% change it will be a profit/loss of £6000 which may be huge change for people like me.

              Hoping to see if anyone have done a risk aversion mechanism. that's all
              You're asking us to do a lot of reading between the lines here. You mention the term, "hedge", but without any context for what your risks are. For example, are you worried about eventually transferring your, or YourCo's, Sterling assets into another currency (e.g. because you are here temporarily)? On what timeframe?

              By all means, purchase some foreign currency if you want to minimize any losses in the immediate aftermath of a vote to leave. Yes, USD would be sensible (or Yen). However, you will obviously lose money if, as is likely, we vote to remain. Also, following Brexit, GBP will eventually stabilise and rise as our new relationship with the EU becomes clearer and exchange rates move back on to the fundamentals, so your target timeframe is important.

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                #8
                Originally posted by sojan View Post
                @both above, why you guys are so arrogant? if you don't know, please do not reply. Please read through currency ETF hedging and I'm well aware of what hedging means

                I was just asking, if you guys are doing anything smart to reduce the risk of GBP going down in case of an exit. for 30K, with 20% change it will be a profit/loss of £6000 which may be huge change for people like me.

                Hoping to see if anyone have done a risk aversion mechanism. that's all

                Unless your situation is different from most then a large part of that is irrelevant. You are presumably earning and spending in gbp so you exposure to relative movements is limited.

                I am perfectly aware of what hedging is. Without an explanation of your understanding I am not convinced you are. You appear to be talkng, in the main, about speculation. No matter, what's in a word.

                For those modest sums you are talking about you have a number of options other than physically exchanging your asset.

                put options. You could buy with your chosen strike. Risk is simply the option premium.

                standard spread trade. Sell gbp against whatever you want for a couple of a quid a point and set a stop at what you are prepared to risk on it being wrong.

                you can do both the above through any spread account or currency broker.

                personally I shall probably buy gbp if there is brexit. But not for a month or so.

                If you have the usd account because you are receiving usd and you also believe cable will drop then simply delay conversion until your target level.
                Last edited by ASB; 19 June 2016, 08:26.

                Comment


                  #9
                  Originally posted by jamesbrown View Post
                  You're asking us to do a lot of reading between the lines here. You mention the term, "hedge", but without any context for what your risks are. For example, are you worried about eventually transferring your, or YourCo's, Sterling assets into another currency (e.g. because you are here temporarily)? On what timeframe?

                  By all means, purchase some foreign currency if you want to minimize any losses in the immediate aftermath of a vote to leave. Yes, USD would be sensible (or Yen). However, you will obviously lose money if, as is likely, we vote to remain. Also, following Brexit, GBP will eventually stabilise and rise as our new relationship with the EU becomes clearer and exchange rates move back on to the fundamentals, so your target timeframe is important.
                  thanks mate. Tried the USD option and did for £30k.
                  Hopefully I might bring back to GBP as can see approx 8% difference now (approx £2500 profit).
                  Thanks for your advice.

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