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Hedging with HRSW Futures and Options


Hedging is a risk management strategy used in limiting or offsetting profitability or loss from fluctuations in commodity prices. In effect, hedging is a transfer of risk.

Hedging involves taking equal and opposite positions in two different markets such as cash and and futures markets.

There are two types of hedging; a long hedge and a short hedge.

Long Hedge
Short Hedge

The long hedge is a strategy used by end users to lock in the price of a product or commodity to be purchased some time in the future.


The short hedge is the sale of a futures contract or option on a physical commodity in order to hedge against the risk of decline in its price.

See a long hedge example using futures and options. See a short hedge example using futures or options.



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