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+---
+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.