03 September 2009
difference between hedging and speculation.
Hedging >>>>>>>
Used to reduce risk and manage margins Reduces the fluctuations in propane prices for retailers and end users Used to "back to back" sales to residential/commercial customers at a fixed profit margin An important part of managing and growing your retail propane company
Speculation >>>>>>>
"Betting" the market will move in one direction Retailers buy product on a fixed price but charge market-based prices to their consumers Speculation increases risk and creates uncertainty on retail margins Can literally put you out of business
Arbitrage >>>>>>>>>
Arbitrage is the practice of taking advantage of a price differential between two or more markets.
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