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What Does Hedge Mean?
What Does Hedge Mean?
What Does Hedge Mean?
Making an investment to reduce the risk of adverse price movements in an asset. Normally, a
hedge consists of taking an offsetting position in a related security, such as a futures contract.
Investopedia explains Hedge
An example of a hedge would be if you owned a stock, then sold a futures contract stating that
you will sell your stock at a set price, therefore avoiding market fluctuations.
Investors use this strategy when they are unsure of what the market will do. A perfect hedge
reduces your risk to nothing (except for the cost of the hedge.
!edging means reducing or controlling risk. "his is done by taking a position in the futures
market that is opposite to the one in the physical market with the ob#ective of reducing or limiting
risks associated with price changes.