Before HedgeStreet, only institutional investors or professional traders could trade market movements and economic events. Now retail traders have the opportunity to participate in these markets.

How HedgeStreet Contracts Work

HedgeStreet creates and lists contracts for members to buy and sell. These contracts cover a wide range of markets, such as currencies and commodities. HedgeStreet members take positions on short-term market movements and outcomes of economic events by buying and selling the contracts that reflect their beliefs about future outcomes.

A Binary is a contract that has a fixed payout out of $0 or $100 and is entered into between traders where the Buyer takes the position that a certain strike price will be reached or a certain event will happen on the expiration date, whereas the Seller takes the position that it will not. Thus, Binaries are all-or-nothing options with a fixed payout of either $0 or $100, depending on the final value of the underlying or event.

For example, 2:30PM Feb Crude Oil > $95.50 (04 Jan 08) is a Binary based on the price of crude oil. The payout value for the contract is $100. The contract's name also specifies that:

• The underlying for this contract is the Feb 08 Nymex^® crude oil futures price at 2:30PM ET
• Payout is based on whether the price of crude oil is greater than $95.50 on the expiration date
• Trading in the contract will stop on the last trading day, January 4, 2008
• The Payout structure for the contract is all or nothing, $100 or $0.

To take a hedging or speculative position that the price of crude oil will be greater than $95.50 on the expiration date, you would buy the 2:30PM Feb Crude Oil > $95.50 (04 Jan 08) contract. On the other hand, to take a position that the price of crude oil will be less than or equal to $95.50 on the expiration date, you would sell the contract.

Why HedgeStreet Contracts Were Created

Risk is inextricably tied to outcomes that are uncertain - outcomes that people don't personally control. Entire industries have been created to manage risk, such as the insurance industry where people buy policies and pay premiums to alleviate the risks of medical bills, car repair costs, or damage to their homes. HedgeStreet's continually expanding range of contracts is designed to allow traders of all levels to hedge against such price fluctuations in forex or commodities markets.