DEFINITION of 'Micro-Hedge'

An investment technique used to eliminate the risk of a single asset. In most cases, this means taking an offsetting position in that single asset.

If this asset is part of a larger portfolio, the hedge will eliminate the risk of the one asset but will have less of an effect on the risk associated with the portfolio.


Say you are holding the stock of a company and want to eliminate the price risks associated with that stock. To offset your position in the company, you could take a short position in the futures market, thereby securing the stock price for the period of the futures contract. This strategy is used when an investor feels very uncertain about the future movement of a single asset.

  1. Hedge

    Making an investment to reduce the risk of adverse price movements ...
  2. Position

    The amount of a security either owned (which constitutes a long ...
  3. Long (or Long Position)

    1. The buying of a security such as a stock, commodity or currency, ...
  4. Offset

    1. To liquidate a futures position by entering an equivalent, ...
  5. Risk

    The chance that an investment's actual return will be different ...
  6. Futures Contract

    A contractual agreement, generally made on the trading floor ...
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  1. Do hedge funds invest in commodities?

    There are several hedge funds that invest in commodities. Many hedge funds have broad macroeconomic strategies and invest ... Read Full Answer >>
  2. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  3. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  4. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
  5. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>
  6. How can I hedge my portfolio to protect from a decline in the food and beverage sector?

    The food and beverage sector exhibits greater volatility than the broader market and tends to suffer larger-than-average ... Read Full Answer >>

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