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About Me
- joewxman
- a meteorologist with a knack for trading and investing in MLPS! I also like horse racing, enjoy cigars and a good port wine.
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4 comments:
Joe - I added a comment to the last post from Monday 9/24 re: hedging. Can you take a look?
i see what you are saying. And you are right. I think there is just a basic misunderstanding about hedges by most investors...I remember 2 years ago when Crosstex bought puts on nat gas when it was 15 and they marked them to market on the quarter and everybody reacted backwards...ultimately the hedge worked the way it was supposed to. I guess what it boils down to is that whether positive or negative...the mlp market is taking any news right now and spinning it negative.
OK, I see your point now as well. Rising commodity prices result in funny accounting triggers where they must show mark-to-market paper losses - I presume this is meant to show that the value of the hedge compared to the current prices are "upside down". But, they do not have to sell at those floor prices; rather they sell at the market price and when they finally sell their production on the market, the mark-to-market accounting entry is reversed.
But sometimes investors sell, misinterpreting these accounting entries as 'bad news'.
exactly!
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