Ann: Ceasing to be a substantial holder, page-6

IMO, shorting and hedging are not the same. Philosophically I am anti shorting because I look for undervalued companies to invest in ... but hedging is an important and critical part of doing business in an uncertain price world. It's risk management 101. That's different.

Would you call COE GSA's hedging?
I would. We are agreeing to sell a certain amount of volume at a specified price to be delivered at a future time. Not much difference there to a COE selling a futures contract (i.e. COE Short) and since there needs to be a counterparty to the transaction someone has purchased (i.e. gone long) the futures contract. In the world of futures its rare for the physical commodity to be delivered ... its an activity to reduce price fluctuation and therefore cash flow uncertainty. Commodity producers are natural short hedgers (to guarantee the price they receive).

I used a Futures contract to make the point. Could just as easily use options, swaps, swoptions ... all are derivatives which achieve the same purposed of derisking the price received by the commodity supplier to the market.

The Sales Agreement or Off-take agreement, further specifies the delivery of the commodity. Both parties gain from the "fixed future price" calculation of the Agreement.

Stock shorting is different though. Its ugly and it may serve some useful purpose with "ugly companies" that are value over valued based on whatever opinion the short has their thesis formed upon. Otherwise all we are saying is stocks can only ever go up ... I mean we buy them because we believe they will go up. If you don't believe stock goes up ...
1. don't buy and look to buy something else or
2. sell it short and buy it back at lower price or
3. buy a put option ... now if you are long you've bought insurance that you can sell your stock at whatever strike price of the option
4. sell a put option ... (disc. I do this from time to time) ... where I agree to buy the product at a certain price in the future say $10 (and my bet is the strike price would remain above $10) receiving a premium from the stock owner for taking the risk that the stock drops to say $9 and I have to pay $10 for something currently worth $9.

It's a part of the market.