Short Hedge

18/07/2010 19:42

An investment strategy that is focused on mitigating a risk that has already been taken. The "short" portion of the term refers to the act of shorting a security, usually a derivatives contract, that hedges against potential losses in an investment that is held long.

If a short hedge is executed well, gains from the long position will be offset by losses in the derivatives position, and vice versa.