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Buy hedge |
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Buy hedgeSee: Long hedgeBuy hedge Similar MatchesHedgeHedgeA strategy employed in the futures, options and warrants markets to reduce risk.Traditionally a commodity producer (say, a cocoa grower) would agree to sell his goods at a stated price at a stated time in the future, and the user of the commodity (say, a chocolate manufacturer) would agree to buy them. By agreeing on a price, quantity and delivery date, they introduce certainty into their operations and reduce risk. For the producer, the risk would be that prices drop, and for the processor that they would rise.The same strategy carries over into the financial markets. Options and warrants can be used to hedge a portfolio position. In the case where shares have been sold, for example, the purchase of equivalent call options (the option to buy shares) means that if the shares rise in price, a corresponding rise in the value of the option will offset the notional loss expected on the underlying shares. Hedge fundHedge fundA fund that may employ a variety of techniques to enhance returns, such as both buying and shorting stocks according to a valuation model. Commercial hedgersCommercial hedgersCompanies that take futures positions in commodities so that they can guarantee prices at which they will buy raw materials or sell their products. Hedged portfolioHedged portfolioA portfolio consisting of a long position in the stock and a long position in the put option on the stock, so as to be riskless and produce a return that equals the risk-free interest rate. HedgeHedgeA transaction that reduces the risk of an investment. Further SuggestionsCovered or hedge option strategiesHedge wrapper Perfect hedge hedge ratio Hedge clause Additional hedge Delta cross hedge Neutral hedge Currency hedge Hedge quality Hedge Aggressive Growth Hedge Fund Delta hedge Sell hedge Hedged tender Money market hedge Inflation hedge Short hedge hedge funds |
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