Efficient risk sharing is what much of the futures and options revolution has been all about. Risks can be managed with foresight. Damage can be controlled with hindsight. A bird in the hand approach is an apt way to describe the strategy of today's options investor. Taking the immediate income of writing a covered call, the battle-tested investor is strategically managing market risk.
Every business faces risks, much of which are unobvious, complex and dynamic.
How well companies manage these risks could help separate the winners from the losers. Managing risk is a proactive process, where, in dynamic markets, people are actively seeking to change their positions so that their institution has the risk profile they want it to have. With derivatives products and options you can pick any point of the payoff distribution and sell off the others. Our proposed risk management program, discussed below, not only protects the pump profit margins with a minimum amount of risk from the spot market, but also offers us an opportunity for extraordinary upside profit with no additional risk. Risk could be canned and sold like tomatoes.