Hedgelet

Dictionary Says

Definition of 'Hedgelet'

A simplified derivative instrument that allows investors to hedge or speculate on economic events such as housing prices, commodity prices, interest rates, currencies and economic indicators.

The price for a hedgelet contract is based on the prevailing market price determined by participants in the market. Every contract has the same defined payout scheme: $10 for a correct contract and $0 for an incorrect one. Each hedgelet contract is set so that investors must make a decision on whether an economic event will occur or not occur.
Investopedia Says

Investopedia explains 'Hedgelet'

For example, on a "Crude Oil > $64" contract an investor can either choose Yes (oil will be more than $64 at expiration) or No (oil will be less than $64 at expiration). If the investor purchases one Yes "Crude Oil > $64" contract for $2, and crude oil ends at $80 when the contract expires, the investor will receive $10 - an $8 profit. However, if the price of crude oil ends at less than $64, the contract will be worthless and the investor will lose the initial $2 investment.

Sign Up For Term of the Day!

Try Our Stock Simulator!

Test your trading skills!

Related Definitions

  1. Hedge

    Making an ...
  2. Hedge Ratio

    1. A ratio ...
  3. Commodity

    1. A basic good ...
  4. Instrument

    1) A tradeable ...
  5. Indicator

    Statistics used ...
  6. Derivative

    A security whose ...
  7. Hedge Fund Manager

    The individual ...
  8. Capital Loss

    The loss ...
  9. Commodity Futures Trading Commission ...

    An independent ...
  10. Delta

    The ratio ...

Articles Of Interest

  1. How Companies Use Derivatives To Hedge Risk

    Derivatives can reduce the risks associated with changes in foreign exchange rates, interest rates and commodity prices.
  2. A Beginner's Guide To Hedging

    Learn how investors use strategies to reduce the impact of negative events on investments.
  3. Commodities: The Portfolio Hedge

    These diverse asset classes can provide downside protection and upside potential. Find out how to use them.
  4. 5 Common Misconceptions About ETFs

    The rise in these funds' popularity has contributed to misinformation about what they are and how they work. Learn more here.
  5. Derivatives 101

    Learn how to use this type of investment as an alternative way to participate in the market.
  6. Introduction To Asset-Backed And Mortgage-Backed Securities

    In this article, we will go through the structure, along with some examples of ABS and valuation.
  7. Profit From Mortgage Debt With MBS

    Mortgage-backed securities can offer monthly income, a fixed interest rate and even government backing.
  8. Cutting Edge Options Trades: The Zero-Premium Hedge

    This options trade is essentially free and can have huge profit potential, but it's not without its risks.
  9. Offset Risk With Options, Futures And Hedge Funds

    Though all portfolios contain some risk, there are ways to lower it. Find out how.
  10. Precious Metals Funds: A Golden Opportunity?

    Used intelligently, precious metals can help an investor obtain decent returns in a terrible market.

comments powered by Disqus
Recommended
Loading, please wait...
Trading Center