Hedging strategy

ok so thought of something while reading hulls derivative book last night.

Basis Risk and optimal hedge ratio.


usually used for futures-spot, but I believe I can re-write the formula to be true for spot on spot movements.

i.e you actively sell euro short to hedge your cable position.


more to come later.

updates

started regulating my trade sizing.

currently long cable 1.5176 at my max position of 30% utilization of leverage (1.8million long).

movements from 1.5335 area to 1.5125 area show a retracement range of 1.5230-1.5250.
Price is sitting at 1.5182.
Daily pivot is 1.5205 on my chart.

this means that if we break that pivot I should plan on taking some profits around 1.5230, leaving a runner, and possibly adding around 1.52 on the retrace...that way if 1.52 breaks, I will have taken profits and could then look for next opportunity.


-P.

recent events

School Application was sent off.

MASSIVE Heatwave in Ottawa, really regretting moving into an apartment without Air conditioning.

Cut out from my standard 6 pairs to focus on one pair. Back to the basics.


Also working on Integration from some random Calculus book I picked up at Chapters.


tis all for now.