Share Hedging strategy for investing foreign stock

[AndrewNg]

Hi everyone,

Just to share this with everyone who is interested to invest into foreign stock and wanted to protect against currency fluctuation. A strategy that you can use is to short sell currency with an equal amount that you invest in the stock that the currency is trading at.

For example,

If you buy US stock at US$1000 with SGD, you can short sell equal amount US$1000 for as long as you are holding the stock. Of course this will take away any gain in currency but the objective is to protect against depreciating of the US Dollar.


regards
Andrew

[shazamnick]

Hi everyone,

Just to share this with everyone who is interested to invest into foreign stock and wanted to protect against currency fluctuation. A strategy that you can use is to short sell currency with an equal amount that you invest in the stock that the currency is trading at.

For example,

If you buy US stock at US$1000 with SGD, you can short sell equal amount US$1000 for as long as you are holding the stock. Of course this will take away any gain in currency but the objective is to protect against depreciating of the US Dollar.


regards
Andrew

Hi Andrew,

I see your point. I came to realise that stock, currency and commodity are inter-related. One needs to know all these in order to be a all-rounder trader. In your eg, I have an different view.

Using August's sell-down as a case study in your eg:

Europe crisis triggered --> World's shares fell --> Euro currency plunged --> Commodity fell -->US Dollar surged(traditional safe haven during crisis times)!!!

You would have lost big in your Long US shares bet as well as your SHORT USD$ hedge.

Hence, it is very tricky to hedge nowadays.
Tks in advance.

[Dennis Ng]

Hi everyone,

Just to share this with everyone who is interested to invest into foreign stock and wanted to protect against currency fluctuation. A strategy that you can use is to short sell currency with an equal amount that you invest in the stock that the currency is trading at.

For example,

If you buy US stock at US$1000 with SGD, you can short sell equal amount US$1000 for as long as you are holding the stock. Of course this will take away any gain in currency but the objective is to protect against depreciating of the US Dollar.


regards
Andrew

Hi Andrew,

I see your point. I came to realise that stock, currency and commodity are inter-related. One needs to know all these in order to be a all-rounder trader. In your eg, I have an different view.

Using August's sell-down as a case study in your eg:

Europe crisis triggered --> World's shares fell --> Euro currency plunged --> Commodity fell -->US Dollar surged(traditional safe haven during crisis times)!!!

You would have lost big in your Long US shares bet as well as your SHORT USD$ hedge.

Hence, it is very tricky to hedge nowadays.
Tks in advance.

if one wants to hedge all risks, might as well do NOT invest. Becos by hedging, you're also taking away possible gains.

Investing is going ahead with a specific view but go in with both eyes open and aware of the Upside and Downside risks and only going ahead if:

1. what if I'm wrong, I will still be financially ok.
2. Upside potential is at least double downside risks.

then further mitigate risks by Asset Allocation and NOT putting all eggs into one basket.

So far by doing so without specifically hedging my risks has helped me made millions and I don't see how I would not get richer if I continue doing what I've been doing.

[AndrewNg]

Thanks everyone for sharing your view points. Learn something new on Shazamnick's caution and good reminder from Dennis two principles.

Hi everyone,

Just to share this with everyone who is interested to invest into foreign stock and wanted to protect against currency fluctuation. A strategy that you can use is to short sell currency with an equal amount that you invest in the stock that the currency is trading at.

For example,

If you buy US stock at US$1000 with SGD, you can short sell equal amount US$1000 for as long as you are holding the stock. Of course this will take away any gain in currency but the objective is to protect against depreciating of the US Dollar.


regards
Andrew

Hi Andrew,

I see your point. I came to realise that stock, currency and commodity are inter-related. One needs to know all these in order to be a all-rounder trader. In your eg, I have an different view.

Using August's sell-down as a case study in your eg:

Europe crisis triggered --> World's shares fell --> Euro currency plunged --> Commodity fell -->US Dollar surged(traditional safe haven during crisis times)!!!

You would have lost big in your Long US shares bet as well as your SHORT USD$ hedge.

Hence, it is very tricky to hedge nowadays.
Tks in advance.

if one wants to hedge all risks, might as well do NOT invest. Becos by hedging, you're also taking away possible gains.

Investing is going ahead with a specific view but go in with both eyes open and aware of the Upside and Downside risks and only going ahead if:

1. what if I'm wrong, I will still be financially ok.
2. Upside potential is at least double downside risks.

then further mitigate risks by Asset Allocation and NOT putting all eggs into one basket.

So far by doing so without specifically hedging my risks has helped me made millions and I don't see how I would not get richer if I continue doing what I've been doing.