Definitions

An individual or company owning or planning to own a cash commodity such as corn, soybeans, wheat, U.S. Treasury bonds, notes, bills, etc. and who is concerned that the cost of the commodity may change before either buying or selling it in the cash market. A hedger achieves protection against changing cash prices by purchasing (selling) futures contracts of the same or similar commodity and later offsetting that position by selling (purchasing) futures contracts of the same quantity and type as the initial transaction.

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