Hedging energy futures with options – how do you pick your strikes?

asked by u/arjunrao · 2d · 1 answers

Still learning the ropes on commodity hedging, particularly in energy. When you're using options to hedge futures positions, what's your typical thought process for selecting strike prices? Are you aiming for delta neutrality, or more about limiting worst-case scenarios?

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  • u/chen_k· 1 pts· 2d

    For me, it really depends on the market outlook and my risk tolerance at the time. If I'm more concerned about a steep downturn, I'll lean towards strikes that offer better protection even if the premium is a bit higher. But for general hedging, I often look at strikes that are slightly out-of-the-money to balance cost and coverage.

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