Double Hedging

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Definition: Double Hedging

Double hedging is a concept in finance which refers to a particular hedging strategy that uses both a futures contract and an options contract thereby increasing the size of the hedge. This double hedge protects the investors from the losses caused by fluctuations in the cash prices.


Double hedging causes the value to increase by two times. However, increasing the size of the hedge to this level, causes speculation concerns.


The benefit of such a hedging secures the investors against fluctuating prices  of the underlying instrument. Investors can reduce their risk by taking put options or short positions of the same amount. By doing so, it would become double hedging.


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