SHANGHAI, May 19 (SMM) - Hedging strategies and instruments may be difficult to apprehend. To attain intuitive inferences into these intricate entries, the author inclines on a new approach and usage of graphic visualization, a concept that will attempt to facilitate an understanding of futures and options features, characteristics and applications.

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Using innovative graphic and tabular depiction methods the author introduces the concept of “hedge patterns.”

The concept of “hedge patterns” (as demonstrated in chapter 5) proves it was possible to tabulate the hedging strategy and interpret each case employed with an aid of a visual recognition. So that each particular case elaborated receives its visual identity and comes forward with radical clarity.

Overall, more than 200 of powerful graphic and tabular illustrations have been designed in order to facilitate an understanding of hedging principles

These visual patterns attached to hedging strategies, provide two dramatic advantages:

• to see how the change in market prices corroborate the portfolio returns, and
• the ability to compare various solutions.

Visualization, underpinned by breakthrough graphic depictions, provides tangible and perceptible quality.

By favoring visualization vs. narrative discourse, and geometric expression vs. algebraic, using unique and innovative figures and tables, this book strives on imbedding hedging conceptions in the minds of risk management executives, to allow better understanding of multiple ways of controlling commodity risk exposure and to implement accordingly, the most appropriate hedging strategies in real-world situations.

Guided with these principles, and dedicated to enclose offering on diverse hedging opportunities, this book is an invaluable resource of hedging case studies and examples, explaining with a clarity and coherence how various instruments are used in different market scenarios to contain, control and eliminate commodity price risk exposure.

Arbitrage trades

A special attention has been devoted to the concept of arbitrage trades and its pragmatic applications.

Efficient market theory has it that investors cannot find securities that are mispriced such as to contract an arbitrage trade.

But if you painstakingly study derivatives markets and futures and options price charts then you will find evidence of price imperfections and distortions (especially if you look down the forward curve line) that actually make it possible to contract an arbitrage trade.

Only you have to know what you are looking for. One of the keys is in creating a position - either long or short - synthetically. That is why the last chapter is devoted to “Synthetic Instrument.” 

An arbitrage portfolio in this respect implies:
1. Negligible or no initial investment (cash out-flow)
2. No risk of loss
3. At least at one state there is a positive return.

Sounds like the quest for the Holy Grail; but it is not. Hedging Commodities teaches you how to spot and configure your own “arbitrage portfolio” and secure risk-free returns that all investors are painstakingly searching for.

Arbitrage opportunities exist in every market—because markets are not perfect.

About the author:

Slobodan Jovanovic is an experienced trader of non-ferrous and precious metals. Born and educated in Belgrade, his business career started in 1980 at Invest Import, one of the largest export and import companies in former Yugoslavia. He was the first to conclude "Trepca" silver bullions export deals with Philipp Brothers of London, and Intermercur in Zurich. During this period he also became very familiar with hedging concepts and strategies and developed a keen interest in the field of derivatives trading and hedging concepts. Presently, he is engaged in designing short educational seminars on derivatives markets and hedging concepts in real-time context for the Serbian Chamber of Commerce. This is his first book on derivatives trading, commodities futures and options strategies seen from the trader's viewpoint.