---
id: 2026-05-30T21:50:08-0400
title: 2026-05-30 21:50:08
tags: []
daily: "[[2026-05-30]]"
---
# 2026-05-30 21:50:08

## Hedging

> A [hedge](https://en.wikipedia.org/wiki/Hedge_(finance))
> is an investment [position](https://en.wikipedia.org/wiki/Position_\(finance\) "Position (finance)")
> intended to offset potential losses or gains
> that may be incurred by a companion investment.

In commodity markets like agriculture,
producers hedge the risk of price fluctuation
using [forwards](https://en.wikipedia.org/wiki/Forward_contract)
and [futures](https://en.wikipedia.org/wiki/Futures_exchange).

Hedging is the technique that makes stock trading not gambling.
[Long/short equity](https://en.wikipedia.org/wiki/Long/short_equity)
allows traders to effectively reduce all risk at the expense of return.

[Insurance](https://en.wikipedia.org/wiki/Insurance)
is a specific form of hedging,
which is funny to think about with the mentality of the other forms.
I'm spending \$120 per month on a bet that I _will_ crash my car.
This speaks to why many people are frustrated by insurance.
Over a 60 year period (age 16 to 76)
\$120 per month is \$90,000 in today's dollars.
The average person is not doing \$90,000 of damage
in their driving lifetime.
There's something to be said
about the value of not having payout the damage at once,
but the numbers still don't look right
for the average risk-tolerance of a rational driver.
