Millar
July 07, 2016
Millar, Fortuity Risk Analytics
We simplify global financial markets to help our subscribers manage risk.

Herd mentality

July 07, 2016

When everyone is crowded in the same bet, it doesn't take much to tip the scales.

Futures and options markets are efficient ways for market participants to protect themselves against adverse market movements (to which they are exposed). For example, oil producers can sell their oil production into the future at a price established today in the futures market, which protects them from future price declines. This is known as hedging. Companies that sell products and services internationally can protect themselves from adverse currency movements by hedging with currency options and futures.

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