Risk management · Pro
Hedging
What does Hedging mean?
Hedging uses an offsetting exposure to reduce a particular existing risk. It may reduce some price risk while introducing costs or a mismatch between the positions.
Example
A producer sells futures to offset the risk of falling prices for its output.
Illustrative example; not a provider’s quoted offer.Why it matters for prop traders
Economic hedging and a prop provider’s permissions for opposing trades are separate questions.
Sources and further reading
The following primary sources support the terminology. Provider rules describe their own products and may change.