While the current hedging strategy had served the company well for the previous three years in a strong AUD environment, how would the company be affected if the AUD/EUR did not rebound above 0.7000? Or what if F. Mayer hedged at the current sub-0.6900 level and the AUD/EUR rebounded to over 0.7000 for the rest of the year? The company would lose all the margins and the ability to outprice competitors.

Goode was wondering what to do in these potentially different global market conditions. Should he leave his euro procurement unhedged, given the worsening economic conditions in Europe? Should he hedge some or all of his exposure, using vanilla foreign exchange forward contracts? Or should he use other hedging strategies, which might provide him with the option to participate in the upside? Should he wait until the AUD/EUR rebounded higher, and opportunistically hedge with one-to-three-month forward exchange contracts like before?