a practical guide to managing risk along the steel supply chain

A practical Guide to Managing risk Along the steel supply Chain

Metals

http://www.cmegroup.com

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About CME Group

Astheworld’sleadingandmostdiversederivativesmarketplace,CMEGroupiswheretheworldcomestomanagerisk.CMEGroupexchangesoffer

thewidestrangeofglobalbenchmarkproductsacrossallmajorassetclasses,includingfuturesandoptionsbasedoninterestrates,equityindexes,

foreignexchange,energy,agriculturalcommodities,metals,weatherandrealestate.CMEGroupbringsbuyersandsellerstogetherthroughtheCME

GlobexelectronictradingplatformandtradingfacilitiesinNewYorkandChicago.CMEGroupalsooperatesCMEClearing,oneofthelargestcentral

counterpartyclearingservicesintheworld,whichprovidesclearingandsettlementservicesforexchange-tradedcontracts,aswellasforover-the-

counterderivativestransactionsthroughCMEClearPort.

Managing Price Risk Along the Steel Supply ChainComprehensive solutions to contain and manage exposure, maximize profi t potential

second only to the international crude oil market, the ferrous industry accounts for a signifi cant and growing amount of

the global economic activity driven by robust demand from China and other emerging economies. In recent years, this

industry has begun a transition in pricing practice from annual benchmark to shorter-term or spot market pricing.

while this adds greater accuracy and timeliness to value determination, it also brings with it higher price volatility

and fi nancial risk all along the supply chain. so how are market participants adapting and thriving in an increasingly

uncertain environment? In a word: hedging.

What does it mean to manage price risk?

Asyoufulfillyourphysicalmarketneeds,buyingrawmaterialsandmanufacturingandmovingyourfinishedproduct,commoditypricesare

constantlyonthemove,reactingtosupply,demandandthemacrofluctuationsoftheworldeconomy.Whetheryouareaminingcompany,steelmill,

servicecenter,orauto/construction/whitegoodsmanufacturer,hedgingisatoolthatcanhelpyouanticipateandmanageassociatedfinancialrisk.

How does price risk management work?

Infinancialmarketsspecifically,priceriskmanagementisthepurchaseorsaleofafuturescontractasatemporarysubstituteforacashmarket

transactiontobemadeatalaterdate.Hedgingusuallyinvolvessimultaneous,oppositepositionsintheunderlyingcashmarketandthefinancial

futuresmarket.Futuresarenotmeanttobeanalternativetopurchasingphysicalproduct,butratherapapertransactionmeanttooffsetany

potentiallossfromunexpecteddipsinhard-productprices.Simplyput,ifyouhaveanordertosellsteelatsomepointinthefutureatapre-

determinedprice,youwillwanttogaugeandmanageyourcostleadinguptothattransaction.Hedginghelpsyoudojustthisbyputtingyourindustry

knowledgeandintuitiveskillstowork,positioningyouforpotentialgaininafuturespositionthatcanoffsetanylossinthephysicalmarket.

How can I make price risk management work for me?

Theenclosedhedgingexamplesprovideaworkingillustrationofthepracticalmechanicsofhedging,anddemonstratetheimportanceof

comprehensivehedgingfrominputthroughoutput—alsoknownasamulti-hedgeapproach.Withanunderstandingofthehedgingprocess,you

willbebetterpositionedtodiscussyourgoalswithaqualifiedfuturescommissionmerchantwhocanexecuteyourhedgingplan.


Hedging ServicesIron Ore 62% Fe, CFR China Average Price Options (ICT) (ICP)

A steel mill which produces HRC for an automotive client is concerned the price of a key input cost, Iron Ore, will rise dramatically over the next 12 months

• ItisNovemberandthepriceofIronOreis$140-Thesteelmillwouldliketohedgebutisconcernedaboutthevolatilityinswapspricing

causingproblemsforthecompany

• Themilldecidestolookatoptionsasawayofhedginginsteadofswaps

• Themillcontactsitsbrokerandsaysthat,basedonitssteelcontracts,themaximumitcanaffordtopayforironorenextyearis$150

• Thebrokergoestothemarketandpurchasesthe$140strikecalloptionsforcalendaryear2012for$10inthefullrequiredvolume

It is now January and the price for Iron Ore has risen to $180/mt

>The insurance premium of $10 per contract at the $140 strike has allowed a financial profit of $30 ($140 strike minus $180 end purchase

price minus $10 premium for call = $30.). By hedging financially, the loss on the physical side was compensated – ensuring a maximum

purchase price of $150. If you had not hedged you would have incurred a real loss of $40/mt for purchasing the required Iron Ore.

It is now June and the price for Iron Ore has fallen to $100/mt

Using Options

Financial

Bought500,000mtofCalendar2012$140strikecallslinkedtoTSI

orPlattsfor$10/mt,clearedthroughCMEClearPort

TheJanuaryportionoftheoptioncontractsettlesontheExchange

at$40/mt

Financial profit or loss: $40 profit - $10 purchase price = $30/mt

Financial

Bought500,000mtofCalendar2012$140strikecallslinkedtoTSI

orPlattsfor$10/mt,clearedthroughCMEClearPort

TheJuneportionoftheoptioncontractsettlesontheExchangeat

$0/mt

Financial profit or loss: $10 purchase price of the option = $10/mt

Physical

PurchaseIronOreat$180/mtforJanuarydelivery

Thephysicalcosts$40/mtmoretopurchase,buttheprofitonthe

optioncoversmostofthis

Physical “Profit” or “Loss” = $40 price change - $30 option

profit = $10/mt

Physical

PurchaseIronOreat$100/mtforJunedelivery

Thephysicalcosts$40/mtlesstopurchasebutthepurchasepriceof

theoptioniswrittenoff

Physical “Profit” or “Loss” = $40 price change - $10 option

loss = $30/mt

>The financial loss on the option has been compensated for by the cheaper purchase price of Iron Ore on the physical side. That means

you have not only been guaranteed a maximum purchase price for iron ore of $150/mt, but you are also able to gain when the market

price for Iron Ore falls.


Forfurtherinformationonourslateofferrousproducts,pleasevisitcmegroup.com/ferrousorcontactoneofthefollowingExchangerepresentatives:

Benefits of using Options:

• Protectagainstpricevolatilityinonedirectionbutbenefitfrom

pricevolatilityintheotherdirectioneffectivelyinsuringagainst

priceexposure

• Intimesofgreatmarketstress,optionsbecomemorevaluable,soitis

possibletoprofitonanoptionhedgegiventherightadvice

• Lockinprofitmarginsandbenefitfromfallingprices

• Improvedabilitytobudget

• Knownfinancialcostofthehedgepriortoexecution–youcannotlose

moreonanoptionthantheamountyoupayforit

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>The Financial profit achieved by hedging has compensated for the increased price of iron ore in the physical market, which means you have

realized your fixed price for Iron Ore of $140/mt. If you had not hedged you would have incurred a real loss of $30/mt for purchasing the

required Iron Ore.

It is now June and the price for iron ore has fallen to $120mt

Hedging ScenarioIron Ore, CFR North China (TIO, PIO)

A steel mill purchasing manager that produces HRC for an automotive client is concerned the price of its main input, Iron Ore, will rise dramatically over the next 12 months

• ItisNovember–Thesteelmillisinnegotiationstosecure500,000mt/monthofIronOreforthenext12months,theamountitneedstoproduce

HRCforitsautomotiveclient.

• ThemillisconfidentofsecuringIronOrevolume,however,duetothedemiseoftheannualbenchmarkpricingmechanism,afixedpriceisno

longeravailable.

• ThemillcontractstopurchasethevolumeofIronOrerequiredandagreestolinkthepricetoaleadingpublishedindexaslistedonCMEGroup.

• ThemillisconcernedthatthepriceofIronOremightrisedramaticallyoverthecomingyearanditmightnotbeabletoincreasetheHRCpriceby

thesameamount,asincreasedcompetitioniskeepingthepriceofHRCfromrising.

• ThemilldecidesitwouldliketofixitscostofIronOrebyhedgingontheCMEGroup.

• Themillcontactsitsbrokerwhooffersafixedpriceof$140mtpermonthfortheentirevolumeovertheyearbeginninginJanuary.Thehedgeisto

belinkedtothesameleadingindexasthephysicalpriceforIronOre.

• Themillaccepts,secureintheknowledgethatatthispriceitwillbeabletosupplyHRCtoitscustomerataprofit.

It is now January and the price for iron ore has risen to $170mt

The Virtual steel Mill: Hedging Along the supply Chain

Financial

Bought500,000mtofJanuaryIronOreswapfuturesthroughCME

ClearPortat$140/mt

SellCMEJanuaryIronOreswapfuturespositionatthenew

priceof$170/mt

Financial profit or loss: $170 - $140= $30/mt

Financial

Bought500,000mtofIronOreswapfuturesontheCMEat$140/mt

SellCMEIronOreswapfuturespositionatthenewpriceof$120/mt

Financial profit or loss: $120 - $140= ($20/mt )

Physical

Purchase500,000mtofIronOreatmarketpriceof$170/mtfor

Januarydelivery

Physicalmarketpricehasalsorisento$170/mt,therefore,itismore

expensivetopurchasetheIronOrerequiredtomakesteel.

Physical “Profit” or “Loss” = $30/mt

Physical

Purchase500,000mtofIronOreinthephysicalmarketat$120mt

Physicalmarketpricehasfallento$120mt,therefore,itisless

expensivetopurchasetheIronOrerequiredtomakesteel.


>The Financial loss incurred by hedging has been compensated for by the cheaper physical price for iron ore–meaning you have achieved the

$140/mt price for iron ore you wanted at the outset.



Benefits of Hedging:

• Protectyourselfagainstpricevolatility

• Lock-inprofitmarginsandprotectagainstanyadverseprice

movements


• Guaranteecashflow

• Benefitfromlowercostoffinancingasyouhaveafullyhedgedposition

• Securelong-termclientbusiness

• Hedgingoffersyouacompetitiveadvantage

• Collateralizeinventory

• Improvecreditrating

Product Exchange Code Reuters Code Bloomberg Code

IronOre62%Fe,CFRNorthChina(Platts)SwapFutures

PIO <0#PIO:> ICPA

IronOre62%Fe,CFRNorthChina(Platts)SwapOptions

ICP <0#ICP+> PIOZ1

IronOre62%Fe,CFRChina(TSI)SwapFutures

TIO <0#TIO:> ICTA

IronOre62%Fe,CFRChina(TSI)SwapOptions

ICT <0#ICT+> TIOZ1

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Hedging ScenarioCoking Coal, FOB Australia (ACR) (ALW) (ACL)

The purchasing manager of a steel mill that produces HRC for an automotive client is concerned the price of a key input cost, Coking Coal, will rise dramatically over the next 12 months

• ItisNovember–Asteelmillpurchasingmanagerisinnegotiationstosecure100,000mt/monthofCokingCoalforthenext12months,the

amountitneedstoproduceHRCforitsautomotiveclient.

• ThemillisconfidentofsecuringCokingCoalvolume,however,duetoincreasingdemandforthisproductthesupplierwillonlyagreetosellona

monthlyaveragepricebasis.

• ThemillcontractstopurchasethevolumeofCokingCoalrequiredandagreestolinkthepricetoaleadingpublishedindexaslistedonCME

Group.

• ThemillisconcernedthatthepriceofCokingCoalmightrisedramaticallyoverthecomingyearanditwillbeforcedtopaythispricetosecure

supply.

• Themill’spurchasingmanagerdecidesitwouldliketofixitscostofCokingCoalbyhedgingthroughCMEGroup.

• Themillcontactsitsbrokerwhooffersafixedpriceof$240mtpermonthfortheentirevolumeovertheyearbeginninginJanuary.Thehedgeisto

belinkedtothesameleadingindexasthephysicalpriceforCokingCoalagreed.

It is now January and the price for Coking Coal has risen to $280mt


Financial

Bought100,000mtofJanuaryCokingCoalswapfuturesthrough

CMEClearPortat$240/mt

SellCMEJanuaryCokingCoalswapfuturespositionatthenewprice

of$280/mt

Financial profit or loss: $280 - $240= $40/mt

Financial

Bought100,000mtofcokingcoalSwapFuturesonthe

CMEat$240/mt

SellCMEcokingcoalSwapFuturespositionatthenewpriceof$220/mt

Financial profit or loss: $220 - $240= ($20/mt)

Physical

Purchase100,000mtofCokingCoalatunknownfuturepricefor

Januarydelivery

Physicalmarketpricehasalsorisento$280/mt,therefore,itismore

expensivetopurchasetheCokingCoalrequiredtomakesteel.

Physical “Profit” or “Loss” = $240 - $280= ($40/mt)

Physical

Purchase100,000mtofcokingcoalinthephysicalmarketat$220mt

Physicalmarketpricehasfallento$220mt,therefore,itisless

expensivetopurchasethecokingcoalrequiredtomakesteel.


>The Financial loss incurred by hedging has been compensated for by the cheaper physical price for coking coal meaning you have achieved

the $240/mt price for coking coal you wanted at the outset.

>The Financial profit achieved by hedging has compensated for the “loss” of profit on the physical side which means you have realized your fixed

price for coking coal of $240/mt. If you had not hedged you would have incurred a real loss of $40/mt for purchasing the required coking coal.

It is now June and the price for Coking Coal has fallen to $220mt





movements









AustralianCokingCoal(Argus)LowVolSwapFutures

ACR <0#ACR:> ACRZ1

AustralianCokingCoal(Platts)LowVolSwapFutures

ALW <0#ALW:> ALWZ1

AustralianCokingCoal(Platts)SwapFutures

ACL <0#ALC:> ACLZ1


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Hedging ScenarioBillet, FOB Black Sea (SSF)

Billet producer selling forward on a fixed price basis to secure a contract while locking in profit margin

• ItisNovember–Abilletproducerhasaclientwhowouldliketobuy10,000mtofbilletpermonthfortwelvemonthsbeginninginJanuary.

• Tosecurethedealthebilletproducermustagreetosupplybilletonafixedpricebasis.

• Itcoststhebilletproducer$550mttoproducebillet.

• ThecurrentpriceforacalendarBilletswapis$600mtwhichwouldprovidea$50mtprofit.

• Boththebilletproducerandtheclientarehappytoagreeacontracttobuyandsell10,000mtpermonthofbilletatafixedpriceof$600mtas

referencedonCMEClearPort.

• Thebilletproducerisconcernedthatanadversepricemovementmightaffectitsforecasted$50mtprofitmargin.Theproducerdecidestolockin

thisprofitmarginbyhedgingthroughCMEGroup.

• Thebilletproducercontactsitsbrokerandagreestobuy20CMEBilletswapcontractspermonthatafixedpriceof$600mtbasistheCMEGroup

SteelBillet,FOBBlackSea(Platts)swapfutures.(Note:eachCMEGroupBilletswapcontract=100mt)

It is now January and the price for billet has risen to $700mt

>The Financial profit achieved by hedging has compensated for the “loss” of profit on the physical side which means you have secured your

$50mt premium which is what you wanted to protect at the outset.

It is now June and the price for billet has fallen to $500mt

>The Financial loss incurred by hedging has been compensated for by the physical profit which means you have secured your $50mt premium

which is the outcome you wanted at the outset.


Financial

Bought20lotsofJanuaryBilletswapfuturesontheCMEat$600/mt

SellCMEJanuaryBilletswapfuturespositionatthenewprice

of$700/mt

Financial profit or loss: $700 - $600 = $100/mt

Financial

Bought20lotsofBilletswapfuturesthroughCMEClearPort

at$600/mt

SellBilletswapfuturespositionatthenewpriceof$500/mt

Financial profit or loss: $500 - $600 = ($100/mt)

Physical

Sold20lotsofBillettocustomerat$600/mtforJanuarydelivery

Physicalmarketpricehasalsorisento$700/mt,therefore,hadyou

notagreedafixedpriceyoucouldhavesoldbilletatthenewprice.


Physical

Sold20lotsofBillettocustomerat$600/mt

Physicalmarketpricehasalsofallento$500/mt,therefore,hadyou

notagreedafixedpriceyoucouldhavesoldbilletatthenewprice.






movements









SteelBillet,FOBBlackSea(Platts)SwapFutures

SSF <0#SSF:> SBPA


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Hedging ScenarioHMS Scrap, CFR Turkey (FSF)

A steel mill purchasing scrap on a fixed price basis to protect against a rising Scrap price.

• ItisNovember–ATurkishsteelmillisconcernedthatthepriceofScrapwillriseinthecomingmonthsresultinginincreasedproductioncosts.

Themill,whichproducesHRC,isconcernedthatitmaynotbeabletopassalonganyriseinthepriceofScraptoitsclientsduetoincreased

competitionintheHRCmarket.

• Themillcontactsitsbrokerandasksforapricequotetohedge10,000mtpermonthofCMEGroupHMS80/20Scrap,CFRTurkeyswapfutures.

• Thebrokerquotesapriceof$400/mtpermonth.

• TheTurkishsteelmilldecidestolockinhispriceofScrapatthispriceforatwelvemonthperiodbyhedgingthroughCMEClearPort.

• TheSteelmillanditsscrapsupplieragreetobuy/sellscrapreferencetheCMEGroupmonthlyaverageHMS80/20FerrousScrap,CFRTurkey

(Platts)swapfutures.

It is now January and the price for scrap has risen to $450mt

> The Financial profit achieved by hedging on the CME Group has compensated for the additional cost of physical scrap. The Steel mill has

been able to protect itself from the adverse impact of a rise in the price of Scrap which was the intended outcome at the outset.

It is now June and the price for billet has fallen to $350mt

>The Financial loss incurred by hedging has been compensated for on the physical side as the price for scrap has also fallen by $50/mt. The

mill has therefore achieved the outcome intended in November when the hedge was purchased.

Note: it is essential that the steel mills physical contract is linked to the CME Group’s contract; HMS 80/20 Ferrous Scrap, CFR Turkey (Platts) Swap

Futures. Linking a physical and a financial contract to different indices and products may not lead to the desired outcome as price variations can occur

between reported prices and differing scrap varieties.


Financial

Bought200ofJanuaryHMSScrapswapfuturesontheCME

at$400/mt

SellCMEJanuaryHMSScrapswapfuturespositionatthenewprice

of$450/mt

Financial profit or loss: $450 - $400 = $50/mt

Physical

Bought200ofHMSScrapattheJanuarymarketpriceof$450/mt

Thesteelmillhadbudgetedforascrappriceof$400/mt.Thephysical

pricehoweverhasrisento$450/mt.

Thishasresultedinanadditionalscrapcostof$50/mtwhichthe

millmaynotbeabletorecoupfromclientsduetoincreasedHRC

competition.


Financial

Bought200ofHMSScrapswapfuturesthroughCMEClearPortat

$400/mt

SellBilletswapfuturespositionatthenewpriceof$350/mt

Financial profit or loss: $350 - $400 = ($50/mt)

Physical

Bought200ofHMSScrapatthemarketpriceof$350/mt

ThesteelmillhadbudgetedforaScrappriceof$400/mt.The

physicalprice,however,hasfallento$350/mt.






movements









HMS80/20FerrousScrap,CFRTurkey(Platts)swapfutures

FSF <0#FSF:> FSAA


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Hedging ScenarioEuropean HRC, Ex-Works Ruhr Germany (NFS)

A German steel mill selling forward on a fixed price basis to secure a contract while locking in profit margin

• ItisNovember–AGermansteelmillhasanautomotiveclientwhowouldliketobuy100,000mtofHRCpermonthfortwelvemonths

beginninginJanuary.

• TosecurethedealthesteelmillmustagreetosupplyHRConafixedpricebasis.

• Itcoststhesteelmill€450mttoproduceHRC.

• ThecurrentpriceforHRCreferencedontheCMEGroupis€500mtwhichwouldprovidea€50mtprofit.

• Boththesteelmillandtheautomotiveclientarehappytoagreeacontracttobuyandsell100,000mtpermonthofHRCatafixedpriceof

€500mtasreferencedonCMEClearPort.

• Thesteelmillisconcernedthatanadversepricemovementmightadverselyimpactagainsthisforecast€50mtprofitmargin.Thesteelmill

decidestolock-inthisprofitmarginbyhedgingthroughCMEClearPort.

• TheGermansteelmillcontactsitsbrokerandagreestobuy2,000CMEGroupEUHRCswapfuturespermonthatafixedpriceof€500mtbasis

theCMEGroupEuropeanHotRolledCoil,Ex-WorksRuhrGermany(Platts)swapfutures.

It is now January and the price for European HRC has risen to €600mt

>The Financial profit achieved by hedging has compensated for the “loss” of profit on the physical side which means you have secured your

€50mt premium–which is what you wanted to protect at the outset.

It is now June and the price for European HRC has fallen to €450mt

>The Financial loss incurred by hedging has been compensated for by the physical profit which means you have secured your €50mt premium

which is the outcome you wanted at the outset.


Financial

Bought2,000ofJanuaryHRCswapfuturesthroughCMEClearPort

at€500/mt

SellCMEJanuaryHRCswapfuturespositionatthenewpriceof

€600/mt

Financial profit or loss: €500 - €600 = €100/mt

Financial

Bought2,000ofJuneHRCswapfuturesontheCMEat€500/mt

SellCMEJuneHRCswapfuturespositionatthenewpriceof€450/mt

Financial profit or loss: €450 - €500 = (€50/mt)

Physical

Sold2,000ofHRCtocustomerat€500/mtforJanuarydelivery

PhysicalmarketpriceforHRChasalsorisento€600/mt,hadyou

notagreedafixedpriceyoucouldhavesoldEuropeanHRCatthenew

price.

Physical “Profit” or “Loss” = €100/mt

Physical

Sold2,000ofHRCtocustomerat€500/mt

Thephysicalmarketpricehasalsofallento€450/mt.Therefore,had

younotagreedafixedpriceyoucouldhavesoldEuropeanHRCatthe

newprice.

Physical “Profit” or “Loss” = €50/mt





movements









EuropeanHotRolledCoil,Ex-WorksRuhrGermany(Platts)swapfutures

NSF <0#NSF:> MSEZ1

U.S.MidwestDomesticHot-RolledCoilSteelIndexfutures

HR <0#HRE:> HRCZ1

U.S.MidwestDomesticHot-RolledCoilSteelIndexAveragePriceoptions

HRO <0#HRO+> ACLZ1


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CMEGroupisatrademarkofCMEGroupInc.TheGlobeLogo,CME,ChicagoMercantileExchangeandGlobexaretrademarksofChicagoMercantileExchangeInc.CBOTandtheChicagoBoardofTradearetrademarksoftheBoardofTradeoftheCityofChicago,Inc.ClearPort,NewYorkMercantileExchangeandNYMEXareregisteredtrademarksoftheNewYorkMercantileExchange,Inc.COMEXisatrademarkofCommodityExchange,Inc.

TheinformationwithinthisfactcardhasbeencompiledbyCMEGroupforgeneralpurposesonly.Althougheveryattempthasbeenmadetoensuretheaccuracyoftheinformationwithinthisbrochure,CMEGroupassumesnoresponsibilityforanyerrorsoromissions.Additionally,allexamplesinthisbrochurearehypotheticalsituations,usedforexplanationpurposesonly,andshouldnotbeconsideredinvestmentadviceortheresultsofactualmarketexperience.

AllmatterspertainingtorulesandspecificationshereinaremadesubjecttoandaresupersededbyofficialCME,CBOTandNYMEXrules.Currentrulesshouldbeconsultedinallcasesconcerningcontractspecifications.

Platts®isatrademarkofTheMcGraw-Hillcompanies,Inc.andhasbeenlicensedforusebytheNewYorkMercantileExchange.Plattsdoesnotsponsor,endorse,sellorpromotethecontractsreferencedhereinandPlattsmakesnorecommendationsconcerningtheadvisabilityofinvestinginthecontracts.

FUTURES:Futurestradingisnotsuitableforallinvestors,andinvolvestheriskofloss.Futuresarealeveragedinvestment,andbecauseonlyapercentageofacontract’svalueisrequiredtotrade,itispossibletolosemorethantheamountofmoneydepositedforafuturesposition.Therefore,tradersshouldonlyusefundsthattheycanaffordtolosewithoutaffectingtheirlifestyles.Andonlyaportionofthosefundsshouldbedevotedtoanyonetradebecausetheycannotexpecttoprofitoneverytrade.Allexamplesinthisbrochurearehypotheticalsituations,usedforexplanationpurposesonly,andshouldnotbeconsideredinvestmentadviceortheresultsofactualmarketexperience.

SWAPS:Swapstradingisnotsuitableforallinvestors,involvestheriskoflossandshouldonlybeundertakenbyinvestorswhoareeligiblecontractparticipants(ECPs)withinthemeaningofsection1(a)18oftheCommodityExchangeAct.Swapsarealeveragedinvestment,andbecauseonlyapercentageofacontract’svalueisrequiredtotrade,itispossibletolosemorethantheamountofmoneydepositedforaswapsposition.Therefore,tradersshouldonlyusefundsthattheycanaffordtolosewithoutaffectingtheirlifestyles.Andonlya

portionofthosefundsshouldbedevotedtoanyonetradebecausetheycannotexpecttoprofitoneverytrade.

Copyright©2012CMEGroup.Allrightsreserved.


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a practical guide to managing risk along the steel supply chain

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