In 2007 crude oil began the year pricedat $60 per barrel. By July 11, 2008, it roseto $145.66, which was a nearly 150%increase, and a 31.6% increase in a littlemore than half a year. Southwest Airlines(LUV) was the only airline that hedgedits largest variable cost. Southwest waspaying $30 per barrel less than most ofits competitors. In a little over five monthslater, on Dec. 26, WTI had droppedall the way down to $32.34. That’s a77.8% decrease. The Great Recessioncreated deflation, knocking down priceseverywhere. If you traded options from thenet long side in 2008, you had a very goodyear. The moves were much greater thanthe premium that you had to pay for crudeoptions, which allowed you to participate inthe movement. It was an equally great yearfor hedgers as they were able to ride outthe volatility relatively unscathed with theprotective use of options.
展开▼
