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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  1. If I use hedging as a risk strategy, do I have to keep my eye on my portfolio all ...

    Understand the concept of hedging and learn how this key element to portfolio management can help an investor protect profits ... Read Answer >>
  2. How are futures used to hedge a position?

    Learn how futures contracts can be used to limit risk exposure. Read Answer >>
  3. What is the difference between hedging and speculation?

    Hedging and speculation are very different in purpose, function and risk profile. Find out how and why investors use both. ... Read Answer >>
  4. How do hedge funds determine what assets to own?

    Learn about the various types of investments that hedge fund managers use, and explore basic hedge fund management trading ... Read Answer >>
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