Series 3: 4.3.1. Hedging Long Positions

Taken from our Series 3

4.3.1. Hedging Long Positions

Unlike speculative strategies, hedging strategies are generally made, not to increase income, but to reduce investment risk. We have seen how businesses that are long on inventory may hedge their price risk by shorting futures. Should prices drop, the profit from offsetting the futures contract would reduce or eliminate the losses in the spot market. Should prices rise, the spot market gains would likewise be absor

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