When it comes to trading and investment, the focus is very much on the balance between risk and reward. Long shots can pay off big but they can also leave you in serious debt danger. With this slightly ominous sentiment still ringing in your ears, here are some pretty out-there investment options that the debt specialists at Debtsolver would definitely recommend that you treat with real trepidation. In fact, these fringe markets are probably best left well alone.

Freight derivatives are a relatively popular fringe trade. The Baltic Exchange offers trading on Forward Freight Agreements (FFAs). Basically, one trader bets another about how much it’ll cost to transport something in the future. For example, how much it’ll cost to ship crude oil from Shanghai to Rotterdam on the 25^th of February, 2015. You bet, wait until the day arrives and check the daily shipping rates as displayed by the Baltic Exchange. Companies will tend to do this to hedge against rising oil and geopolitical risks to shipping. It’s a risky business.

Betting on the weather is not something to be recommended but so great is its impact on business that there are those who do. We’re not talking about the odds on a sunny weekend either. It’s about the average over time, divided into ranges and packaged up for trade. A warm winter will affect power company revenue by decreasing fuel demand. They’ll often hedge against this by buying a contract that’ll pay out if the temperature averages at five degrees above the historical average for the winter.

European businesses that produce carbon dioxide as a side effect of their business activity are afforded an allowance of carbon credit. Should they go over this allowance, they have to buy more carbon credits to make up for it. North America is beginning to test out similar programmes now but European-based carbon futures can already be traded. The value of carbon credits depend on environmental legislation, geopolitical issues and the price of fossil fuels like crude oil and natural gas.

Think you can pick out the Oscar winners and summer blockbusters? The Commodity Futures Trading Commission (CFTC) is investigating whether investors should be able to buy and sell futures based on how much money a film will take in its first month. It’ll be a bit like the Hollywood Stock Exchange and buying futures will be based on picking surprise hits and selling futures will be based on picking out the unforeseen failures. Big-time financiers, producers and distributors will attempt to hedge the millions they’ve already invested with this kind of future trading.

Investments are a notoriously unpredictable and volatile market to start with and these fringe markets really are only for those traders with huge bankrolls and a keen understanding of the risks. They call for hugely specialised knowledge of the market and substantial investor credentials. They are showing growth though, with vast sums of money passing through them annually. As we said at the beginning, with the potentially huge rewards comes massive risk and it can all turn to crippling debt in no time. Don’t manage your debt with long shots. Talk to a dependable debt specialist like those at Debtsolver and free yourself from the burden of bad debt.

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This entry was posted on Monday, June 21st, 2010 at 7:00 am and is filed under Debt News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.