Hi Alan,
I came across your blog when I was looking for information to help me hedge risk on US equity trades using FX ETF's. I am looking at investing in a crude oil ETF (DBO) and would like to hedge my risk using FX ETF's. I was looking at putting on a 10K position. However, if using an ETF such as FXC I would have to invest another, (approximately) 10K into a currency ETF. Is there another way?
I looked into a Canadian ETF (HOU) however it is 2x leverage and am not looking for that kind of exposure yet.
Cheers,
Brian
Calgary, Alberta, Canada.
Hi Brian,Thanks for your message,my own view is that unless you are willing to use something with leverage or accept a position that is not delta neutral then it would mean you putting up a corresponding amount on the hedge using straight ETF's.The only other way would be to use the DBO or FXC options(if you can do this in your account) and buy a put option for every 100 DBO ETF that you purchase. The challenge is that if you are not hedging with DBO options but FXC then it will not be easy to get a good Delta neutral position as you will be hedging Crude Exposure with a Currency option. I guess the question is are you trying to hedge the exposure to Oil, or the fluctuations in the Canadian $ and the impact on oil/your account of the cost of DBO in US $
Not sure if that is any help ?
Commenting by HaloScan
