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What Is ‘Hedging’ and How Are Derivatives Commonly Used for It?

Hedging is risk mitigation through an offsetting position; derivatives like futures lock in prices to protect against adverse market moves.
Greeks.Live07.11.25

What Is ‘Hedging’ and How Are Derivatives Commonly Used for It?

Hedging is a strategy to mitigate financial risk by taking an offsetting position in a related security. Derivatives, such as futures and options, are ideal for hedging.

For example, a company expecting to sell Bitcoin in the future can sell a Bitcoin futures contract today to lock in a price, protecting against a price drop.

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