Hedging

1) a futures transaction concluded to insure an en-possible price drop when making long-term transactions; 2) a term used in commercial practice to refer to various methods of insuring profit from changes in prices or exchange rates on the stock exchange when making futures transactions, when the seller, simultaneously with the conclusion of such unreal goods, purchases, and the buyer sells the corresponding number of futures contracts for the same period and for the same number of goods (i.e., the seller or buyer, simultaneously with a trade transaction, performs an inverse operation with futures on the exchange). After the transaction with a real commodity, the sale or redemption of futures contracts is carried out. If one party loses as a seller, then it wins by acting as a buyer. Thus, any change in price causes sellers and buyers to lose one contract and win the other. If additional income and futures losses balance out, profits in production are protected from currency and price fluctuations. The X. mechanism is based on the fact that changes in market prices for real goods and prices for futures are close in size and direction.