Long hedge

Long hedge,

Definition of Long hedge:

  1. For this reason, a long hedge may also be referred to as an input hedge, a buyers hedge, a buy hedge, a purchasers hedge, or a purchasing hedge.

  2. Transaction that secures an advantage or protection against a possible increase in the price of a traded item (commodity, financial instrument, security, etc.) that will be bought or sold in the future. For a buyer or consumer, it provides at least a partial protection by securing future supply at a fixed ceiling price. For a seller it locks in an advantageous floor price. Also called buy hedge, buying hedge, or purchasing hedge. See also short hedge.

  3. A long hedge refers to a futures position that is entered into for the purpose of price stability on a purchase. Long hedges are often used by manufacturers and processors to remove price volatility from the purchase of required inputs. These input-dependent companies know they will require materials several times a year, so they enter futures positions to stabilize the purchase price throughout the year.

Meaning of Long hedge & Long hedge Definition