Although a hedge might not be perfect,it should be partially effective if the spot and futures prices move in opposite directions.

Question

Quizplus · Accepted Answer

A hedge is designed to be effective when the spot and futures prices move in the same direction, but by opposite amounts, allowing gains in one market to offset losses in the other. If they move in opposite directions, it could potentially increase the risk rather than mitigate it.

Although a Hedge Might Not Be Perfect,it Should Be Partially