In my opinion, hedging should be treated like insurance. If you...

In my opinion, hedging should be treated like insurance. If you can afford the wild swings of the POO without severely straining the books, you probably should not hedge. However, the STO case is a good example of taking on an enormous capital commitment without thinking through the consequence of a POO fall. They couldn't afford the consequences and ripped every deckchair and furnishing out of the cruise ship, as well importing added floatation to keep it afloat. A classic case where 'insurance' hedging may have made a huge difference.

Aside from the insurance aspect, hedging is like going to the casino. The house eventually wins and the longer and deeper you play the game, the more surely you will lose. That's why hedge funds thrive- they make money and they're better at the game than you are. So use them wisely.

mutineer