HedgeStreet

Infobox Company
name = HedgeStreet

type = Private
genre =
foundation = 2004
founder = John Nafeh, Ph.D.
location_city = San Mateo, California
location_country = United States
location =
locations =
area_served = United States
key_people =
industry = Finance
products = HedgeStreet Exchange
services = futures/derivatives exchange
revenue =
operating_income =
net_income =
assets =
equity =
owner =
num_employees = 50
parent =
divisions =
subsid =
slogan =
homepage = http://www.hedgestreet.com/
footnotes =
intl =

HedgeStreet is the first Internet-based government regulated (CFTC) event futures/derivatives exchange. The company operates the HedgeStreet Exchange, which launched in October 2004 and provides traders with a place where they can hedge against or speculate on economic events and price movements.cite news
title = Hedging for Small Investors | author = Steven Smith
url = http://www.thestreet.com/_tscs/options/stevensmith/10196132.html
work = TSCOptions column | publisher = TheStreet.com | date = 2004-11-25 | accessdate = 2007-12-26
quote = The site, which launched in early October .... operates as both an exchange and clearinghouse, is a licensed operator, in this case by the Commodity Futures Trading Commission.] The reasoning behind the creation of HedgeStreet was that with the rise of individual private investment in stocks, there might be a similar appetite for individuals to invest in derivatives.cite news
title = Firm Offers Hedging on a Small Scale | author = Daniel Nasaw | coauthors = Ian McDonald
url = http://online.wsj.com/article/SB109838600867752205-search.html?collection=wsjie%252F30day&vql_string='university+of+Iowa'%253Cin%253E(article-body)/
format = Preview | work = WSJ.com | publisher = The Wall Street Journal
date = 2004-10-22 | accessdate = 2007-12-26
quote = Now a new online market wants to bring derivatives to the masses, albeit in small doses and not in the speculative form that critics contend can pose financial ruin.] This focus on small investors created sufficient confusion that John Nafeh, founder of HedgeStreet, created the term "hedgelet" to help explain the company's business model.cite news
title = HedgeStreet has opened up derivatives trade to Main Street | author = Laura Counts
url = http://sanjose.bizjournals.com/sanjose/stories/2006/05/29/story4.html
publisher = Silicon Valley / San Jose Business Journal | work = Print Edition
date = 2006-05-26 | accessdate = 2007-12-26
quote = "I'd spend the first half of every conversation saying 'no,'" said Mr. Nafeh, chairman of the San Mateo company. "I had to come up with the term 'hedgelet,' so I could explain what it was, instead of what it wasn't."]

"Hedgelets" come in two varieties: binary options and capped futures.cite news
title = Hidden Opportunities | author = Jonathan Hoenig
url = http://www.smartmoney.com/tradecraft/index.cfm?story=20060227
work = SmartMoney.com | publisher = Hearst Corporation with Dow Jones & Company
date = 2006-02-27 | accessdate = 2007-12-26
quote = Two types of contracts are offered, binary options and capped futures. Both are referred to as "Hedgelets."] Binary options are bets on outcomes, "yes/no" contracts, that pay out a small dollar amount (e.g. $10) if final price of an instrument is above the strike price and nothing if below. For instance, HedgeStreet launched hurricane contracts in 2006.cite news
title = Investors can bet on storm contracts | author = Adam Shell
url = http://www.usatoday.com/money/markets/us/2006-08-24-storm-hedge-usat_x.htm
work = USATODAY.com | publisher = USA Today
location = New York | date = 2006-08-24 | accessdate = 2007-12-26
quote = HedgeStreet is offering two classes of so-called binary contracts, whose values are based on insurance-claims estimates provided by ISO.] One type of hurricane contract is based on the aggregate insurance-claims estimate for the entire Atlantic hurricane season; if the estimate exceeds the strike price, the binary options pay out. Capped futures provide a method for profiting from a rise or fall in an instrument's value relative to a specified value, the cap. Unlike binary options which pay out a specified dollar amount, the payout of capped futures is variable. Given a "cap" and "floor" defining a value range, one purchases at a current price. If the price rises, one reaps profit that is the difference between the purchase and final price - up to the cap; likewise for reaping a loss if the price should drop, one's loss limited by the floor.

As of mid-2006, the company had two major investment partners. The Chicago Board Options Exchange purchased a minority stake in HedgeStreet in February 2006 and assists in marketing the company's "hedgelets". In March 2006, Norwest Venture Partners provided a multi-million dollar investment in the company.

In 2007, IG Group announced intent to acquire HedgeStreet.cite news
authorlink = Regulatory News Service | author = Regulatory News Service
title = IG Group Hldgs plc - Acquisition
url = http://www.hemscott.com/companies/company-news-item.do?companyId=4985&newsId=53878217548693
work = Hemscott.com | publisher = Ipreo
date = 2007-11-19 | accessdate = 2007-12-26
quote = IG Group Holdings plc ('IG' or 'the Group') agreed on Friday 16th November to purchase the entire issued share capital of HedgeStreet Inc ('HedgeStreet') for $6.0m, approximately £2.9m.] cite news
authorlink = Regulatory News Service | author = Regulatory News Service
title = IG Group Hldgs plc - Acquisition Update
url = http://www.hemscott.com/news/rna/item.do?newsId=56416542973120
work = Hemscott.com | publisher = Ipreo
date = 2007-12-07 | accessdate = 2007-12-26]

In the beginning of 2008 IG Holdings (based out of the UK) purchased Hedgestreet.

ee also

*Prediction market
*Futures market
*Binary options
*Paper trading

References