What Is Hedging?

This is the eBook version of the printed book.

This Element is an excerpt from A Trader's First Book on Commodities: An Introduction to The World's Fastest Growing Market (9780137015450) by Carley Garner. Available in print and digital formats.

 

Hedging 101: Why hedging is now more important than ever--and how it works.

 

Now more than ever, businesses are looking to the futures markets for an efficient means of mitigating the price risk associated with their operations. The opportunity to hedge isn’t without costs or inconveniences. Nonetheless, excessive volatility in commodity prices has created an environment in which the burden of hedging can easily be justified by the potential detriment of assuming the price risk outright....