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Options and Futures

Purchasing Hedge or Long Hedge

In order to safeguard against potential price hikes in the future, investors often turn to purchasing futures contracts for cash commodities. This involves buying contracts for the same amount and type of commodities that are expected to be bought in the future. This practice, also known as a buying hedge, is a form of hedging that helps mitigate risks associated with fluctuating market prices. By closing the futures position at the time of purchase, investors can protect themselves from potential losses and ensure a more stable financial position.

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