How to hedge - calculating different leverage, self insure

[jago25]

Let's say you have:

$5000 of of XAU you want to hedge against the value falling.

Because it's physical it's 1:1. Then in your broker you have 25:1 leverage

* 0.25 = $1250. This is close to 3.1 lots to hedge $5000 of gold. (31 micro lots)

Is this correct?


You could also do similar things to insure against prices changing in your other income streams. For example, if you work in oil and gas you could have a sell option opened when prices are high. Or if you get paid in one currency and live in another country you could use that currency pair accordingly. This could allow you to be more ballsy with your positions by protecting what you already have. The only drawback could be opening a short position in your own company when prices are high - that would be insider trading I guess?

What would be some examples for if:

- you have £100,000 of savings in GBP but you live in Spain and spend in EUR? How would you hedge this exactly?
- you have a silo of 10,000 gallons of oil stored somewhere and you want to hedge against the value going down