Hedging - The use of futures and options to reduce risk of price movement by establishing the opposite position of what an individual or corporation plans to do with a particular physical commodity in the future. An example would be a corn farmer that planted corn in May, sells a contract of Dec Corn futures on June 10, to offset risks of prices moving lower into the fall because he would be selling harvested corn in the future.
Rainy Day Trader
Glossary Of Trading Terms
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