TradingIntermediate#Risk Management#Strategy
Hedge (Cobertura)
H
Definition
A transaction or position intended to reduce a defined exposure to price changes. It can reduce one risk while leaving or adding others, so it is not insurance or a guarantee against loss.
Source reviewed
- CFTC: economic purpose of futures markets opens in a new tab
Supports: The CFTC explains that futures hedging can limit losses from price changes and describes the standardized contract context.
- CFTC: futures market basics opens in a new tab
Supports: The CFTC explains hedger and speculator roles and warns that futures and options are volatile, complex, and risky.
- Investor.gov: introduction to options opens in a new tab
Supports: The SEC investor bulletin explains option rights, expiration, premiums, and the potential loss of the entire premium or unlimited writer losses.
Concept Diagram
Key Takeaways
1
A hedge targets a stated exposure; an opposite trade alone does not establish protection.
2
Direct offsets, options, and related-asset positions have different contract, basis, liquidity, and counterparty risks.
3
Premium, funding, fees, slippage, margin, leverage, and liquidation can make the combined position lose money.
4
Specify size, duration, cost, exit, and failure conditions before treating a position as a hedge.
Practical Example
Illustrative only: a user holds 10 ETH and takes a short perpetual position for 3 ETH after documenting the contract, margin, funding, liquidation threshold, and exit time. If ETH falls, the short may offset part of the spot loss; if ETH rises, the short loses value. Funding, fees, slippage, and a forced close can make the result differ from the simple 3-to-10 size ratio.
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