Hedged Position

Hedged Position

An investment in which risk is reduced by making an offsetting investment. There are a large number of hedging strategies that one can use. For example, one may take a long position on a security and then sell short the same security or a similar security. This means that one will profit (or at least avoid a loss) no matter which direction the security's price takes. A hedged position may reduce risk, but it is important to note that it also reduces profit potential.
References in periodicals archive ?
This type of accounting is required when a hedged position is not measured at fair value with recognition of gains/losses in income in accordance with regular GAAP.
The taxpayer would then hold the hedged position until a future tax year, and eventually cover it with the low-basis long position.