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TeachMeFinance.com - explain hedging hedging -- the purchase or sale of a commodity, security or other financial instrument for the purpose of offsetting the profit or loss of another security or investment. Thus, any loss on the original investment will be hedged, or offset, by a corresponding profit from the hedging instrument. historic definition... Hedging -- An operation intended as a protection against loss in another operation. Usually hedging is selling against a purchase or purchasing against a sale ; but, as in stocks, it may be buying or selling one stock to offset a possible loss in another. Copyright © 2005 by Mark McCracken, All Rights Reserved. TeachMeFinance.com is an informational website, and should not be used as a substitute for professional financial or legal advice. TeachMeFinance.com and its owner recommend consultation with a professional financial advisor prior to any investment or financial decision. Please read our disclaimer.