Hedging

Hedging is taking a second position that loses when your first one wins, to cut risk. Market makers hedge every fill and hold no view. For an Indian trader the hidden unhedged bet is usually the dollar, because every dollar position is also a rupee bet; a short contract is a hedge in rupees, and US airlines that do not hedge fuel wear the oil price.

Go on

In the help centreSee how leverage and margin work on Mochatrade
  • Margin callA margin call is a broker's demand for more funds when your account falls below the required margin; ignore it and…
  • Call optionA call option is the right to buy at the strike before expiry. Strike 24,200 and premium 80 means profit only above…
  • DrawdownDrawdown is the fall from an account's peak to its trough, in percent. Recovery is lopsided: minus 50% needs plus 100%…
  • Margin tradingMargin trading is taking a position larger than your deposit, the margin. A US broker lends you cash at interest; on a…
  • LiquidityLiquidity is how much you can trade without moving the price: a tight spread and deep size at each level. US…
  • Contango and backwardationContango is later futures months priced above nearer ones, the normal state when storage costs money; backwardation is…

Educational content only. Not investment advice. Leveraged products magnify losses as well as gains.

Where it comes up