What is the definition of a gas and electric index; a fixed price and hedging ?

Question

What is the definition of a gas and electric index; a fixed price and hedging ?

Answer 1

Hedging allows you to buy an item now for use in the future.  This way you know what your future expenses will be.

If you use a lot of gas, a sudden hike in the price might blow your budget, but if you bought the gas at a fixed price 6 months ago, you would not effect your budget.

Look at it like buying a years supply of 'Forever' stamps at the post office just before a postal rate increase.

Answer 2

The Natural Gas Index is designed to measure the performance of highly capitalized companies in the natural gas industry involved primarily in natural gas exploration and production and natural gas pipeline transportation and transmission.

The Electric Index is the same thing only dealing with electric companies. They monitor performance of electirc companies and their new - electric explorations and production.

Hedging is a strategy designed to minimize exposure to an unwanted business risk, while still allowing the business to profit from an investment activity.

A stock trader believes that the stock price of Company A will rise over the next month, due to the company's new and efficient method of producing widgets. He wants to buy Company A shares to profit from their expected price increase. But Company A is part of the highly volatile widget industry. If the trader simply bought the shares based on his belief that the Company A shares were underpriced, the trade would be a speculation.

Since the trader is interested in the company, rather than the industry, he wants to hedge out the industry risk by short selling an equal value (number of shares × price) of the shares of Company A's direct competitor, Company B. If the trader were able to short sell an asset whose price had a mathematically defined relation with Company A's stock price (for example a call option on Company A shares) the trade might be essentially riskless and be called an arbitrage. But since some risk remains in the trade, it is said to be "hedged."

--as seen on wikipedia

in a public offering of new securities, price at which investment bankers in the underwriting Syndicate agree to sell the issue to the public. The price remains fixed as long as the syndicate remains in effect. The proper term for this kind of system is fixed price offering system. In contrast, Eurobonds, which are also sold through underwriting syndicates, are offered on a basis that permits discrimination among customers; i.e., the underwriting spread may be adjusted to suit the particular buyer.

as seen on answers.com

hope this helps.

I work at a hedge fund, and I only really knew about the indexes and hedging.