CFA CFA Level 1 Question of the Week – Alternative Investments

Question of the Week – Alternative Investments

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    • Avatar of AdaptPrepAdaptPrep
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        Since gold is an input, you would
        want to hedge future price increases. As the price goes up, your costs go up,
        and your margins are squeezed. If the price goes down, you are fine.

        To hedge against gold price
        increases, you would want a position that pays off if gold price increases. The
        option to sell gold will pay off as
        prices go down, not up. That is
        opposite to the position you want to take.

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