Dynamic hedging is an ongoing risk management process. That process involves the regular evaluation and adjustment of a portfolio to keep it within certain limits. To be successful, dynamic hedgers need to be disciplined and humble. Like other hedging strategies, the purpose is to reduce overall swings in net worth, not increase revenues.

Dynamic hedging is best suited for complicated hedging problems with an unknown final exposure, like grain and soybean production or options positions. In either of those examples, we can never be quite sure of the quantity we are hedging until the end. The good news is that a well-designed dynamic hedging strategy like the one at the heart of Quartzite Precision Marketing (QPM) can help manage this uncertainty.

For the last half-century or so, modern finance has been developing the tools and tactics to measure and manage uncertain risk. This technology is well-established in high-end financial institutions but has yet to find its way to other users where it could be useful. Quartzite is here to bring that technology to grain and soybean producers.

The concept is relatively simple. Changes in crop and market conditions throughout the growing season bring changes in overall exposure. Dynamic hedgers evaluate these changes on an ongoing basis and respond as necessary. No strategy is perfect, but we think a flexible and disciplined approach like dynamic hedging is the best way to round the corners of the grain and soybean markets.