6. Fixed-rate contracts and forwards may be best. "I believe suppliers are more willing to give fixed-price contracts than ever before," says Wallace of Greenwich Treasury Advisors, "simply because they see a need for it. The buyer has no basis risk, no hedge accounting — what's not to like?" Not every buyer will qualify for a fixed price, however. Suppliers want customers with exceedingly good credit ratings that buy in large volumes, says Wallace. Buying forward is a popular choice; forward contracts are based on spot pricing and are very transparent. However, a CFO should know the company's underlying exposure with relative certainty before using forwards.

7. Options don't have to be expensive. To many companies, using options to hedge is anathema because of the up-front costs. Wallace says that's due more to human nature than anything else. "It's a very emotional knee-jerk reaction to paying money up front to avoid a possible future loss," he says. But there are products with little up-front costs, such as out-of-the-money options. Out-of-the-money options allow a company to lock in a price within a certain range by using calls and puts. Using derivatives can require the application of hedge accounting treatment, however, so the finance department should gauge the impact of hedge accounting before choosing this route.

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