Do Nothing, Blend, Or Fully Hedge
Hedging is not a menu of unrelated techniques. It is a single line. At one end you cover nothing. At the other you cover everything. Blending is the whole stretch in between: you lock part of your exposure now and leave the rest open to the market.
That is exactly what the calculator shows you, and it is exactly what the "Blend your position" slider does. One decision, one ratio, applied across your whole exposure.
The two ends of the line
Do nothing (0% hedged). You convert at whatever the rate is on the day. Your upside is unlimited and so is your downside. For a business with thin margins and a known payment date, this is a position, not an absence of one.
Full hedge (100% hedged). You lock every unit of your exposure at the forward rate. Your cost is fixed, your budget holds, and market moves stop mattering.
Benefits of a full hedge:
Drawbacks:
When businesses use this: manufacturers with fixed production costs, thin and stable margins, long-term pricing tied to foreign costs, and large one-off payments where the amount is certain.
Blending: everywhere in between
What it is: You lock part of your exposure now and leave the rest open. One ratio, applied across the whole exposure. Hedge 40% and you have taken some risk off the table while keeping a slice open to the market, instead of being forced into all or nothing.
What it does to your numbers: your effective rate becomes a weighted average of the locked part and whatever the spot rate turns out to be (your blended rate). Your remaining risk falls in a straight line with the ratio: at 60% locked, 40% of the risk is left.
Benefits:
Drawbacks:
When businesses use this: businesses with variable revenue or order volumes, forecasts with a margin of error, anyone who wants protection but is not willing to give up all the upside, and seasonal businesses whose currency needs move around.
Some businesses start at a 50/50 blend: half certainty, half opportunity. There is nothing special about 50. Move the slider and watch the risk figure move with it.
A separate idea: averaging in over time
Everything above is about how much you cover. Averaging in (also called dollar-cost averaging, or hedging in tranches) is about when you cover it: instead of booking your cover in one go, you spread it across several dates so your rate ends up near the average of the market over that stretch.
The petrol filling analogy: you don't fill your car once a year at whatever the pump price happens to be. You fill up regularly, and over the year you pay close to the average price. Averaging in does the same thing with your FX rate.
This is a structure a BLK.FX specialist arranges for you across several dates. It is not something the app books, and the blend slider does not model it. Where it fits a payment cycle, a specialist sets the schedule and places the contracts.
When businesses use this: regular rolling foreign payments such as monthly salaries or quarterly rents, and anyone uncomfortable committing a large amount at a single rate.
Choosing your point on the line
| Factor | Do nothing (0%) | Blend (1% to 99%) | Full hedge (100%) |
|---|---|---|---|
| Cash flow certainty | Low | Medium | High |
| Risk tolerance | High | Medium | Low |
| Market view | Bullish | No strong view | Neutral or bearish |
| Confidence in the amount | Any | Partial | High |
| Margin sensitivity | Low | Medium | High |
Many businesses sit somewhere in the middle and move along the line as the date approaches and the forecast firms up. Fully covering next quarter's known commitments, blending the quarter after, and leaving anything beyond six months open is one policy in use, not a target.
A BLK.FX specialist can talk through how policies like these are built.
Key takeaway: There are two ends and one continuum. Blending means locking part of your exposure now and leaving the rest open, in one ratio across the whole position. Averaging in over time is a different idea about timing, and a specialist arranges it.