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. 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 >>
  2. 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 >>
  3. Which of the following would be considered a short hedge ...

    The correct answer is a) Long the commodity and short the futures Read Answer >>
  4. Why do companies enter into futures contracts?

    Learn how companies use futures contracts for the purposes of hedging their exposure to price fluctuations as well as for ... Read Answer >>
  5. 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 >>
  6. What is the purpose of a hedge fund?

    Find out what a hedge fund is, how it is set up and why it is different than other forms of investment partnerships like ... Read Answer >>
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