The serious gamblers always play craps. Why? Because the right gambling strategy can bring them closer to even odds with the House than any other game. This happens because craps allows you to place multiple bets on the same roll, including placing bets both “for” and “against” at the same time. This is called “hedge” betting.

The term “hedging your bet” dates back to a time when hedges were functional instead of decorative, made of sharp bramble bushes that kept cows in and poachers out (interesting side note: the term “stock” comes from the same hedges…in the 17th century, sales were recorded by cutting a stick of bramble in half, with the buyer receiving the “stock” and the Exchequer the “counterfoil”. You put the two together to prove ownership.) The hedge constrained you, but also kept risk at bay.

We bring up hedging because of the turn that NYMEX prices took this week. For the past several weeks natural gas had ignored the volatility of other markets, with prices being dictated by the fundamentals of supply and demand.

This week, the market forces came roaring back.

Oversupply and mild temperatures were contributing factors, but this week’s sharp price drop back below $7.00 was natural gas finally succumbing to the pounding that Wall Street and others commodities took all week.

Predictable? In retrospect, sure. But pretty much everyone was caught off guard. In the current market, it seems like one price predictor holds sway for the week, then gives way to another the next. It’s not just a case of reading the signs…it’s knowing which sign to read and which to ignore.

Your energy suppliers are looking at these same prices and seeing the same unpredictability as they calculate what plans and prices they can offer you. Everyone is, in essence, at the same craps table. The difference is, they know how to hedge their bets. Do you?

Mind the brambles

No gambler is ever 100% right. The successful gambler, however, is never 100% wrong. For your energy provider, their hedge comes from buying futures on the NYMEX in both a “long” (you win if the price goes up) and a “short” (you win if the price goes down) position, and from buying low and storing for times when the market is high.

Have you got hedges? You bet. But you’ve got to know the game.

For natural gas, you can play the market the same way as the providers by putting together a plan that combines a locked percentage with a percentage that rides the market. You can also buy and store…you can even buy, store and sell. Like the best gamblers, the best natural gas savers aren’t letting their bets ride on a one-price plan.

For electricity, your hedge comes from being able to respond to markets, and locking at the right spot. You’ve also got a card up your sleeve: controlling your use. There are substantial savings to be found from knowing when to hit the OFF switch. It’s all in the timing.

What this means to you. The best gambler is always the safest player at the table, because they never lose more than they can afford, and they’re ready to take their winnings when they come. Cost Containment Intl. wants to give you a place at the table.

Check the NYMEX.