FREE Guide - 5 Chart Patterns You Need to Know!

Double Hedging


What does Double Hedging mean?

A hedging strategy that uses both a futures contract and an options contract to hedge a cash market position. Double Hedging protects investors against losses caused by changes in the cash prices of the underlying instrument.

Futures Knowledge Explains Double Hedging

An investor can hedge a cash market position by both a futures position and an option position. For example, an investor has a diversified stock portfolio of $1 million. He can hedge downside risk in the market by buying put options of $1 million on the S&P 500 or takes a short position in the S&P 500 using index futures contracts of $1 million. If he uses both, it would be called double hedging. Similarly a trader may have sufficient stocks to meet all sales commitment holds but yet he can prefer to go for double hedging and take a long position in the futures market in excess of the speculative position limit as an offset to a fixed price sale.



Get Your FREE Technical Analysis Guide!
Timing is everything, and with this guide, you'll learn how technical analysis can help find the right time to enter and exit your futures trades. Nearly 30 explanations and examples of the most popular technical analysis tools are all in this one handy guide. It's like having a futures trading mentor at your side!