Selling Hedge


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.

  1. Hedge

    Making an investment to reduce the risk of adverse price movements ...
  2. De-hedge

    The process of closing out positions that were originally put ...
  3. Legacy Hedge

    A hedge position that a company holds for an extended period ...
  4. Commodity

    1. A basic good used in commerce that is interchangeable with ...
  5. Long (or Long Position)

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