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June 10, 2005 at 08:00 PM
SAN MATEO, Calif. (HedgeWorld.com)–HedgeStreet’s tag line is “Trade Things that Matter.”
So what matters to the average American these days? Gas prices? HedgeStreet lets people trade them. Home prices? HedgeStreet has contracts for those. Interest rates? Got ‘em. Employment figures? Check.
In fact, HedgeStreet has a trade for just about any corner of the economy you can think of, from crude oil prices to non-farm payroll numbers to currencies. And the really interesting part is that no qualifications are necessary to trade these derivative contracts, called Hedgelets. The only requirements are access to an Internet connection to access the site and $100 for the initial deposit.
Essentially trading Hedgelets is betting on outcomes. In that respect it’s not much different from online gambling. However, instead of playing a game of chance to win extra money, Hedgelets allow everyday folks to use their knowledge to hedge against economic events in their own lives–rising gas prices or an overseas trip requiring currency conversion, for instance–or to make a straight profit.
With a minimum trade order of $10, plus minimal settlement fees for contracts held until expiration, Hedgelets could also be considered just plain fun and games for those with more disposable income.
Think of it as E*Trade or Ameritrade, but with derivatives.
“E*Trade disintermediated the brokerage from the overall trade flow,” said HedgeStreet co-founder Russell Andersson. “It used to be you call your broker, the broker called their exchange rep, the rep had the trade executed and then it went to settlement and clearing. Then E*Trade linked the customer directly with the exchange and they could place their orders directly to the exchange. HedgeStreet attempts to collapse and disintermediate the entire process. We are the exchange and also handle settlement and clearing.
“The net result is this economy of savings and net reduction in cost.”
Mr. Andersson said of the 25 million Americans with online brokerage accounts, fewer than 250,000 trade derivatives. HedgeStreet attempts to bring to derivatives trading the same kind of “empowerment” that online brokerages brought to stock traders. But some might argue that such empowerment should not extend to derivatives, which tend to be perceived as murkier and more risky than traditional stock and bond investments. Others would argue just as strenuously, however, that greater use of derivatives provides the best kind of understanding.
