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Hedging a stock portfolio with index futures
Index futures can reduce a portfolio’s broad market exposure without selling every holding. The hedge is an estimate whose effectiveness must be measured.
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Futures Trading Guide
Understand futures contracts, read market structure and build strategies for direction, relative value and hedging. Follow ten stages from contract basics to advanced research and disciplined risk management.
Start with What a futures contract commits you to, then follow the next lesson links. Explore 40 lessons with worked examples, exercises and further reading.
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Hedging Real Exposures · All lessons
Hedging Real Exposures
Use futures to manage stock, commodity, currency and interest rate exposures.
Advanced
Producer and consumer commodity hedges
A producer and a consumer face opposite cash price risks. Futures can offset part of those risks while leaving local basis and quantity uncertainty.
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Advanced
Hedging foreign currency receipts and payments
A future foreign currency receipt or payment creates an exchange rate exposure. Correct hedge direction depends on both the cash flow and the contract quotation.
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Interest rate hedges duration and basis risk
A bond portfolio’s rate exposure is better described by sensitivity than by face value alone. A futures hedge must account for the contract’s own changing sensitivity.
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