That hedging is hard to explain,
It's fairly alleged
That you aren't really hedged
If you're also expecting a gain.
One of the many talking points employed by JPMorgan Chase CEO Jamie Dimon in his closely watched Senate testimony this week was that "this particular synthetic credit portfolio was intended to earn a lot of revenue if there was a crisis. I consider that a hedge; what it morphed into, I will not try to defend." The Chief Investment Office's loss - $2 billion and rising - on its London Whale position was simply well-intentioned risk management gone bad. In this, Mr. Dimon deliberately muddied the waters and his senatorial inquisitors failed to impose any clarity on the discussion. Anytime you say "I expect this position to make a profit if X happens," you are making a bet, not a hedge. The fact that market turmoil is expected to trigger the profits does not remove it from the realm of speculation. The only one who is truly hedged is the one who can say: "My results are locked in regardless of what the market does."
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