Hedging: The Price is Right (or is it?)
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Our clients often ask us: how do you know when the price is right to hedge?
Many initial discussions should happen before this question is even asked, such as:
- What are your strategic goals (for example, is there a cash flow, dividend, or drill plan you must protect)?
- What problem (or potential problem) is your hedging trying to solve?
- How will your hedging help you with your capital plan if your hedging is successful?
Answers to these questions drive the hedging or risk management plan. Now we can attempt to answer the initial question of price – is it at an appropriate level to hedge?
However, there are still several questions that need to be answered:
- Let’s consider different tenors (time periods) on the forward curve. What is the market price of these tenors, and does it meet our goals for each tenor?
- What hedge instruments should we select in each tenor where the price is acceptable? Swaps may well be sub-optimal!
- What should we do if the price is unacceptable for certain tenors? Not hedging is not an option, and locking in a loss is decidedly unpalatable.
To make these decisions, we must have some context of value. This is where Mobius excels – data-informed decision-making. Our data, experience, analytics, fundamentals, and strategy combine to structure an optimal and efficient hedge strategy tailored to your goals.
The basis for this decision-making and the selection of the derivative instruments is clearly articulated based on objective values (market attributes), which represent the quality of the hedge opportunity available to you.
Hedge strategy recommendations always attempt to raise the expected value of your portfolio and the likelihood of meeting or exceeding your goals (at the strategy's inception) with a high degree of confidence.
In addition, by regularly monitoring your portfolio (including derivatives), we will know which sources of revenue are the riskiest at any point in time and how best to restructure the components – again, with the goal of raising the expected value of your portfolio.
Mohit Arora
Roles and Responsibilities
As Managing Director and Head of Strategy at Mobius Risk Group, Mohit Arora leads the firm’s Strategy and Strategy Direct platforms. He and his team partner with clients to optimize derivative hedge portfolios, enhance portfolio value, and reduce risk through timely, data-driven decisions. Mohit oversees the Analytics, Research, and Execution teams, ensuring that complex insights are translated into clear, actionable strategies that accelerate decision-making and improve outcomes. With a quantitative background and more than two decades of trading experience in oil and gas options, Mohit delivers practical, high-impact solutions to today’s most complex market challenges.
Prior Experience
Before joining Mobius in 2018, Mohit held senior leadership roles across the energy trading landscape. At Koch Supply & Trading, he led the Proprietary Options Desk, managing crude and products option portfolios as well as tail risk for physical crude, products, NGL, fuel, and agricultural desks. Previously, as a Portfolio Manager at AAA Capital Management, he designed and executed multi-strategy oil options portfolios driven by both fundamental and quantitative analysis. Earlier in his career, Mohit served at Entergy Koch and later Merrill Lynch Commodities, where he built and traded natural gas option strategies, structured hedging solutions for corporate clients, and developed enhanced return/index products for hedge funds.
Professional Experience
- Koch Supply and Trading, Head of Proprietary Options Desk
- AAA Capital Management, Portfolio Manager
- Merrill Lynch Commodities, Lead structurer for Producers/Consumers/Refiners and Hedge Funds
- Entergy Koch Trading, Natural Gas Option Trader
- Koch Hydrocarbons, Quantitative Analyst and NGL trader
Education
- Btech, Indian Institute of Technology, Kanpur
- MS Aerospace Engineering, University of Michigan Ann Arbor
- Dual PhD (Aerospace Engineering and Scientific Computing), University of Michigan, Ann Arbor
