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HomeGlossaryHedge

Hedge

A hedge is a financial technique used to reduce risk to the value of your assets from the effects of inflation or other pricing anomalies. Many investors choose derivatives like futures contracts, call options and swaps to effectively hedge against changes in the value of underlying assets such as gold. For example, call options give you the right to buy gold at a set price at a point in the future, thus hedging against inflation, while put options allow you to sell at an agreed price at a set time. Neither of these options is obligatory but they are an effective form of insurance.