At the start of 1994 Metallgesellschaft A.G., the 14th largest corporation in Germany, stood on the brink of bankruptcy as a result of more than $1 billion in losses from trading in oil futures. The futures trades were part of a sophisticated strategy ostensibly conceived by its New York subsidiary to hedge against dangerous swings in the price of oil and oil related products. How could a set of transactions that purportedly “locked in” profits, making the firm safer, in fact lead the firm to bankruptcy? Understanding the mistakes made by Metallgesellschaft is critical if other firms are to avoid a similar fate without forsaking the significant benefits available from a correctly planned hedging strategy.