Hedging 101

Hedging is a way to transfer risk.  A hedge is established in one market to offset price risk in another. The concept of hedging applies to a whole range of commodities and financial instruments such as interest rate and currency risk.  If the cost for an item to be hedged is currently $20 but a marketer will not have to purchase it for use or resale until 3 months from now, and if prices go up to $40, the marketer will have to spend double the money for the item. This could severely impact the bottom line because it may…