Hedging essentially involves adopting equal and opposite positions in the spot and futures markets for the same assets.

Question

Quizplus · Accepted Answer

Hedging involves taking positions in two or more markets (such as the spot and futures markets) to reduce or eliminate risk by offsetting potential losses in one market with gains in another. Adopting equal and opposite positions in the spot and futures markets for the same asset is a common hedging strategy to protect against price fluctuations.

Hedging Essentially Involves Adopting Equal and Opposite Positions in the Spot