Hedge

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Hedge

A transaction that reduces the risk of an investment.

Hedge

To reduce the risk of an investment by making an offsetting investment. There are a large number of hedging strategies that one can use. To give an example, one may take a long position on a security and then sell short the same 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. Hedging may reduce risk, but it is important to note that it also reduces profit potential.

hedge

A security transaction that reduces the risk on an already existing investment position. An example is the purchase of a put option in order to offset at least partially the potential losses from owned stock. Although hedges reduce potential losses, they also tend to reduce potential profits. See also perfect hedge, risk hedge, short hedge, special arbitrage account.
Case Study A hedge that limits potential losses is also likely to limit potential gains. In May 1997 Georgia entrepreneur and billionaire Ted Turner entered into an arrangement whereby Mr. Turner had the right to sell four million of his Time Warner shares to a brokerage firm at a price of $19.815 per share. At the same time the brokerage firm acquired the right to buy the same four million shares at a price of $30.45. This particular hedge, called a collar, established a minimum and maximum value for four million shares of Time Warner owned by Mr. Turner. In other words, the former owner of the Atlanta Braves, Atlanta Hawks, CNN, and superstation WTBS acquired the right to obtain at least $19.815 per share by agreeing to give up any increase in value above $30.45. Time Warner stock subsequently skyrocketed when America Online acquired the firm at a price nearly triple the $30.45 stipulated in the agreement. Thus, the hedge ended up costing Mr. Turner approximately a quarter of a billion dollars. On a positive note, the four million shares represented less than 4% of Mr. Turner's total holdings of Time Warner stock he had acquired when the firm bought his Turner Broadcasting several years earlier.
References in periodicals archive ?
1: Hedgerow restoration studies showed the value of hedgerows in terms of their pest control and pollination benefits in rotational cropping systems (from Morandin et al 2016).
Birds can also be used to strengthen pup's ability to work hedgerows, tree lines and take hand signals.
The wide variety of hedgerow plants and their close proximity offers a great opportunity for the photographer to make a veritable library of shots of flowers and insects from just one location.
The hedgerow protected the water course, providing shade and breeding habitat for some of the country's even more endangered marine species.
Organised by The Organic Milk Suppliers Co-operative (OMSCo), the safari will be led by an experienced and knowledgeable guide and activities include identifying plants, looking for insects and hunting for signs of the animals and birds that live in each hedgerow.
1975) and Thorpe (1978) in a hedgerow of apple orchard, with a cylindrical geometry of measurement.
For more information, read Hedgerow History by Gerry Barnes and Tom Williamson (Windgather Press, 2006).
They had made their way through the hedgerow at roughly the same time I had.
My suburban hedgerow concept calls for an 8- to 12-foot-wide hedgerow that would replace a 700-foot fence between two one-acre properties in new developments.
ENGLAND'S glorious landscape spreads out in a gorgeous patchwork quilt of emerald green and glittering gold, all stitched together with delicate threads of hedgerow.
Farming practices have changed dramatically in recent decades, and the hedgerow has all but disappeared from the American landscape.
Together, they aim to recruit thousands of volunteers to plant 100,000 trees and improve around 120,000m of hedgerow.