Micro-Hedge

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Micro-Hedge

The practice of hedging the risk on a particular security or asset. An investor micro-hedges when he/she seeks to reduce the risk associated with a single investment. A common way to micro-hedge is to take a roughly equal but opposite position on the same or similar security. For example, one may take a long position in oil while taking a short position in natural gas. It is important to note, however, that micro-hedging usually has little or no effect on a portfolio consisting of several securities.