| Definition of Hedging |
You undertake a hedging marketing strategy when you take a position in futures market that fully or partially offsets price risks from your present cash position. The primary principle in hedging is that the gains (losses) in one market tend to offset the losses (gains) in the other market if you correctly hedge.
| Cash Market | Futures Market |
Owner of Actual Commodity [Long]
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Seller of Contracts [Short]
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User of Actual Commodity [Short]
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Buyer of Contracts [Long]
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