- Joined
- 4/1/14
- Messages
- 5
- Points
- 11
We compete in a market where my competitor is international and sets prices in $
Say $2.10 /kg
My raw material is $1.5 so my margin is $0.6 /kg
The catch is that I need to set my selling price 2 months in advance but only pay for raws at the rate on the day of purchase ( assume that forward cover is not an options for the sake of the exercise, I'll explain why later)
If I assume exchange will be 10.7 in 2 months time I need to charge R22.47/ kg
If exchange goes to 11 volumes will be good but my margin will suffer due to increased raws
I will not be able to increase price as I have already committed for 2 months.
If exchange goes to 10 then I will not sell unless in drop price mid month, once gain I loose.
If I can more accurately predict the direction the rand will go, and also pick a number I can optimize our margin.
I have already found that simply being closer to the daily moves helps in the short term especially doing spot negotiations. Following technical analysis on a daily basis is giving me a good weekly view, my objective is to improve my understanding, and if possible pick a forecasting model that I can use to predict the 2 month trend.
Will be easier to just enter a zero cost collar?
Say $2.10 /kg
My raw material is $1.5 so my margin is $0.6 /kg
The catch is that I need to set my selling price 2 months in advance but only pay for raws at the rate on the day of purchase ( assume that forward cover is not an options for the sake of the exercise, I'll explain why later)
If I assume exchange will be 10.7 in 2 months time I need to charge R22.47/ kg
If exchange goes to 11 volumes will be good but my margin will suffer due to increased raws
I will not be able to increase price as I have already committed for 2 months.
If exchange goes to 10 then I will not sell unless in drop price mid month, once gain I loose.
If I can more accurately predict the direction the rand will go, and also pick a number I can optimize our margin.
I have already found that simply being closer to the daily moves helps in the short term especially doing spot negotiations. Following technical analysis on a daily basis is giving me a good weekly view, my objective is to improve my understanding, and if possible pick a forecasting model that I can use to predict the 2 month trend.
Will be easier to just enter a zero cost collar?