Tuesday, December 19, 2006

Chocolate Position

Two of my friends mentioned that I didn't actually give a trade in the chocolate post. Fair enuf. Here's one unit of the trade:
Buy: 500 shares of HSY
Buy: 1 (one) share of Lindt (these are trading for about 30,000 CHF)
Buy: 1 lot of March cocoa
Sell: 1 mini S&P futures (Long-only traders will not want to do this.)

The March cocoa is a hedge against input prices for these companies running up. I am a little hesitant to do this since the commitments of traders shows that the big funds are heavily long, and that is usually a bearish sign. So you may have to take some short-run pain on this - but of course it is a hedge.

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