Stories of an Aluminum Alloy Door and Window Shop

Boss, you have to short every time you buy aluminum. Why? Because aluminum prices are volatile.

Your purchases are one-time and concentrated — say, on a specific day each year — but your sales cycle is long, maybe 365 days, with customers coming in steadily. Window and door prices float with the aluminum market.

When prices rise, you can charge your customers more. But when they drop, you have to lower your prices too, or they'll walk away to another supplier.

To hedge against big swings in aluminum prices, you lock in your profit by opening an equivalent short position when you buy, then as customers place orders, you close out that portion of the short.

Every small business owner running an aluminum alloy shop does this — and so do all other companies tied to raw materials.