Hyperinflation Hedge?

[jabba917]

Hi,

Ok, we have some people that think we're going to get high inflation and some people that think the dollar is going to implode and hyperinflation is on the cards. No one knows for sure, but I like to be prepared, so, my question is - How would one hedge? A Gold Call option is one way, but most companies I've looked at, won't let you execute the option to physically buy the Gold, just in the denominated currency, which might not be worth the paper it's printed on!

P.S. Sorry if the terminology is incorrect, I'm still learning.

Cheers.

 

[Martinghoul]

Buy arable land, commodities and other physical (and, preferably, productive) assets...

 

[jabba917]

Why wouldn't you buy an option like I said?

 

[Martinghoul]

In a hyperinflationary world, paper of any kind is worthless... Your options are simply a different type of paper.

 

[jabba917]

I thought by definition, an option gave you the right to buy the physical commodity?

 

[Martinghoul]

I thought by definition, an option gave you the right to buy the physical commodity?

A call option gives you the right to purchase the underlying at a price equal to the strike. In the case we're discussing, the underlying is most likely an exchange-traded future. Exchange-traded futures can be either cash-settled or physical delivery, which would determine whether you get cash or the asset itself. To be fair, most commodity futures are physically settled.

 

[tripleogstar]

If I were you and was worried about hyperinflation, which by the way is highly unlikely, I would just buy some short sterling put options (if your talking about he UK of course).

 

[tomorton]

Surely, Japan-style deflation is the more likely (and more serious) long-term fundamental risk?

 

[gooseman]

If I were you and was worried about hyperinflation, which by the way is highly unlikely, I would just buy some short sterling put options (if your talking about he UK of course).

why? they are financially settled in sterling, whch would be worth..................................................................................................................................fck all.

 

[jabba917]

Thanks, so something like the PHAU on the LSE?

A call option gives you the right to purchase the underlying at a price equal to the strike. In the case we're discussing, the underlying is most likely an exchange-traded future. Exchange-traded futures can be either cash-settled or physical delivery, which would determine whether you get cash or the asset itself. To be fair, most commodity futures are physically settled.

 

[jabba917]

Erm...I thought that as well.

why? they are financially settled in sterling, whch would be worth..................................................................................................................................fck all.

 

[jabba917]

$64k question - But why are traders piling out of fiat currencies and into real assets?

Isn't that inflation hedging, at least in the short term?

Surely, Japan-style deflation is the more likely (and more serious) long-term fundamental risk?