What Is the Difference between a “Long Hedge” and a “Short Hedge”?
A long hedge is used when a party anticipates buying an asset in the future and wants to lock in the purchase price today to protect against a price increase. They achieve this by buying a futures contract (going long).
A short hedge is used when a party already owns an asset or anticipates selling one and wants to lock in the sale price to protect against a price decrease. They achieve this by selling a futures contract (going short).
Glossar
Long Hedge
Strategy ⎊ A Long Hedge is a risk management strategy employed by a market participant who holds a short position in an asset and simultaneously takes a long position in a related derivative instrument, such as a futures contract or a call option.
Short Hedge
Hedge ⎊ A short hedge, within the context of cryptocurrency derivatives, represents a strategy designed to mitigate downside risk associated with anticipated price declines in an underlying digital asset.
Hedge
Mitigation ⎊ A hedge, within cryptocurrency and derivatives markets, represents a strategic position established to offset potential losses stemming from adverse price movements in an existing asset or portfolio.