Hedging. Money Management www. A hedge is an investment position intended to offset potential losses or gains that may be incurred by a companion investment. In simple language, a hedge is used to reduce any substantial losses or gains suffered by an individual or an organization. A hedge can be constructed from many types of financial instruments, including stocks, exchange traded funds, insurance, forward contracts, swaps, options, gambles,1 many types of over the counter and derivative products, and futures contracts. A stock trader believes that the stock price of Company A will rise over the next month, due to the companys new and efficient method of producing widgets. He wants to buy Company A shares to profit from their expected price increase, as he believes that shares are currently underpriced. But Company A is part of a highly volatile widget industry. So there is a risk of a future event that affects stock prices across the whole industry, including the stock of Company A along with all other companies.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. Archives
November 2017
Categories |