FlyerTalk Forums - View Single Post - Cathay Pacific books HKD $7.6 billion loss
Thread: Cathay Pacific books HKD $7.6 billion loss
View Single Post
Old Jan 8, 2009 | 6:30 am
  #4  
Rambuster
FlyerTalk Evangelist
10 Countries Visited20 Countries Visited30 Countries Visited20 Years on Site
 
Join Date: Jun 2005
Location: Point Place, Wisconsin
Programs: LH HON, BA Gold, EK Gold
Posts: 14,508
Originally Posted by DKNYSprt95
Can someone explain how hedging contracts work? I can't seem to figure out why they would lose out on oil futures unless these contracts are expensive to execute. If oil/fuel price is lower on delivery than then hedged contracts, then can't they just buy on the open market price?
Futures are different to put/call options.
A "future" needs to be excercised whereas with a put/call it is optional.
Bascially CX bought a lot of oil at a higher price than currently available on the market. They need to write down this difference.

If it had been the other way round it would have been a windfall profit.
Rambuster is offline  
Reply