Futures: Simple Hedging

Futures: Simple Hedging

Intuition Publishing Pty Ltd
Updated Sep 24, 2020

Hedging involves entering into a transaction where the gains/losses from the hedging instrument will offset the gains/losses in an underlying position. For a hedge to be effective the two positions should be correlated. Here we look at the need for hedging, symmetrical risks, hedging using futures, and futures margining.