Buying Hedge

DEFINITION of 'Buying Hedge'

A transaction that commodities investors undertake to hedge against possible increases in the prices of the actuals underlying the futures contracts.

BREAKING DOWN 'Buying Hedge'

Also called a long hedge, this particular strategy protects investors from increasing prices by means of purchasing futures contracts. Many companies will attempt to use a long hedge strategy in order to reduce the uncertainty associated with future prices.

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RELATED FAQS
  1. Can you invest in hedge funds?

  2. How are futures used to hedge a position?

    Futures contracts are one of the most common derivatives used to hedge risk. A futures contract is as an arrangement between ... Read Answer >>
  3. What happens if you don't hedge your investments?

    Learn the purpose, advantages and disadvantages of hedging, and find out how to utilize hedging to enhance an overall investment ... Read Answer >>
  4. Which of the following would be considered a short hedge ...

    The correct answer is a) Long the commodity and short the futures Read Answer >>
  5. How do hedge funds use short selling?

    Learn how hedge funds use short selling to profit from stocks that are falling in price. Explore different analytical techniques ... Read Answer >>
  6. What does a hedge fund do?

    Read how hedge funds differ from other investment vehicles and how their investment strategies make them unique and potentially ... Read Answer >>
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