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  • What Does Hedge Mean?

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    Mahfuzul Haque Sujan
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    Hedging is an investment strategy used to reduce risk from adverse price movements by taking an offsetting position, such as using futures contracts. For example, an investor could own a stock but sell a futures contract to sell the stock at a set price to avoid market fluctuations. Hedging allows investors to reduce risk when they are unsure of future market movements, with a perfect hedge eliminating risk except for the cost of the hedge itself. Hedging aims to reduce or control risk by taking an opposite position in the futures market from one's position in the physical market.

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    Hedging is an investment strategy used to reduce risk from adverse price movements by taking an offsetting position, such as using futures contracts. For example, an investor could own a stock but sell a futures contract to sell the stock at a set price to avoid market fluctuations. Hedging allows investors to reduce risk when they are unsure of future market movements, with a perfect hedge eliminating risk except for the cost of the hedge itself. Hedging aims to reduce or control risk by taking an opposite position in the futures market from one's position in the physical market.

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    4 views1 page

    What Does Hedge Mean?

    Uploaded by

    Mahfuzul Haque Sujan
    Hedging is an investment strategy used to reduce risk from adverse price movements by taking an offsetting position, such as using futures contracts. For example, an investor could own a stock but sell a futures contract to sell the stock at a set price to avoid market fluctuations. Hedging allows investors to reduce risk when they are unsure of future market movements, with a perfect hedge eliminating risk except for the cost of the hedge itself. Hedging aims to reduce or control risk by taking an opposite position in the futures market from one's position in the physical market.

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    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.

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