Hedging requires an offsetting position.

Name: Hedging requires an offsetting position.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

This is true. Hedging involves taking an offsetting position in order to reduce risk. For example, if a farmer wants to hedge against a decrease in crop prices, they might take a short position in the futures market, which would be offset by the long position they hold in the physical commodity.

Hedging Requires an Offsetting Position