DEFINITION of 'Selling Hedge'

A hedging strategy with which the sale of futures contracts are meant to offset a long underlying commodity position.

Also known as a "short hedge."

BREAKING DOWN 'Selling Hedge'

This type of hedging strategy is typically used for the purpose of insuring against a possible decrease in commodity prices. By selling a futures contract an investor can guarantee the sale price for a specific commodity and eliminate the uncertainty associated with such goods.

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RELATED FAQS
  1. Which of the following would be considered a short hedge ...

    The correct answer is a) Long the commodity and short the futures 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. Do hedge funds invest in commodities?

    Learn about hedge funds that invest in commodities. Read about Commodity Trading Advisors who focus specifically on trading ... Read Answer >>
  4. 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 >>
  5. 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 >>
  6. Do hedge funds and mutual funds invest in commodities in high inflation environments?

    Hedge funds and mutual funds are very different types of investment vehicles.The contents of a hedge fund are determined ... Read Answer >>
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