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RT's,
This talk about hedging made me think about a family very close to me that
was getting ready to buy a new house. At the time interest rates were on
the rebound and they didn’t have their loan locked in yet. I told them that
they could buy a couple of cheap out of the money T-Bond put options and if
there was a dramatic drop they would be ok. So we did it. Interest rates
leveled out and began to fall shortly thereafter so they didn't need the
protection after all, but if I were in the same ball park again I'd
seriously consider doing that.
It would seem that the same thing could be used if you invested in a stock
and you heard that the company was going to do something that they would
need to borrow a large sum for. You might be able to protect that
investment from a damaging move in interest rates by hedging. So is that
crazy or not.
Regards,
Brent
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