hedge

noun

\ ˈhej

Definition of hedge

(Entry 1 of 3)

1a : a fence or boundary formed by a dense row of shrubs or low trees

b : barrier, limit pikemen … present a hedge of metal points from which any cavalry would flinch— Tom Wintringham regarded it as the main function of their existence to raise a hedge around the law— F. W. Farrar

2 : a means of protection or defense (as against financial loss) realization that common stocks are the best hedge against inflation— C. E. Merrill

3 : a calculatedly noncommittal or evasive statement bureaucratic literature … festooned with hedges and qualifications— Fortune

hedge

verb

hedged; hedging

Definition of hedge (Entry 2 of 3)

transitive verb

1 : to enclose or protect with or as if with a dense row of shrubs or low trees : to enclose or protect with or as if with a hedge (see hedge entry 1 sense 1a) : encircle homes hedged with boxwoods

2 : to confine so as to prevent freedom of movement or action : to obstruct with or as if with a barrier : hinder hedged about by special regulations and statutes— Sandi Rosenbloom

3 : to protect oneself from losing or failing by a counterbalancing action hedge a bet

intransitive verb

1 : to plant, form, or trim a hedge

2 : to evade the risk of commitment especially by leaving open a way of retreat : trim hedged on the issue

3 : to protect oneself financially —usually used with against in order to hedge against inflation— George Katona : such as

a : to buy or sell commodity futures (see future entry 2 sense 3) as a protection against loss due to price fluctuation

b : to minimize the risk of a bet

hedge

adjective

Definition of hedge (Entry 3 of 3)

1 : of, relating to, or designed for a hedge (see hedge entry 1) a hedge plant hedge selling on the commodity exchanges

2 : born, living, or made alongside or as if alongside a dense row of shrubs or low trees : born, living, or made near or as if near hedges (see hedge entry 1 sense 1a) : roadside the services of a hedge parson a hedge wedding

3 : inferior sense 3 a hedge tavern

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Examples of hedge in a Sentence

Noun

the messenger was confronted with a hedge of spears held aloft by the castle guards

Verb

The garden is hedged by flowering shrubs. She hedged when she was asked to support the campaign. He hedged his earlier comments about the need for new management.

Recent Examples on the Web: Noun

Last month, Chavez said a sales tax increase is needed to continue expanding local social service programs and as a hedge against possible state and federal funding cuts. — Thy Vo, The Mercury News, "Chavez drops sales tax hike bid, citing fellow supervisors’ lack of interest," 10 Sep. 2019 The company also counts its technology portfolio as a hedge against a graying workforce and a slower economy. — Fortune, "China’s Biggest Private Sector Company Is Betting Its Future on Data," 22 July 2019 Some investors have looked to bitcoin and other cryptocurrencies as a hedge against possible declines in domestic currencies, traders said. — NBC News, "Bitcoin hits a 15-month high, propelled by Facebook's Libra cryptocurrency," 24 June 2019 In a research report earlier this month, Anthony Pompliano, a founding partner at asset-management firm Morgan Creek Digital, said bitcoin was acting as a hedge against global instability and moving differently compared with other asset classes. — Steven Russolillo, WSJ, "Bitcoin Tops $9,000 as Crypto Rally Trounces Stocks, Bonds, Gold and Oil," 17 June 2019 The place, distinguished by three gables, is partially hidden by hedges and trees. — oregonlive.com, "The childhood home is where the heart is," 4 Aug. 2019 Working with production company CleftClips, Amuse Bouche will erect a stage on Melody’s patio, where lush trees and full hedges surround the set’s red curtains. — Khanh T.l. Tran, The Hollywood Reporter, "Drink and Dish: Patton Oswalt's Comedy Dinner, Miley Cyrus-Approved Vegan Hot Spot," 30 July 2019 Outside, grounds of more than a third of an acre hold a swimming pool with a spa, lawn and hedges. — Jack Flemming, latimes.com, "Hot Property: 'This Is Us' star says this is it to modern Venice pad," 29 June 2019 Earlier this month, 110,000 people descended on the postcard-perfect island town of Allinge, with its two-story houses with red tile roofs, stone hedges and gardens with fruit trees and roses. — Martin Selsoe Sorensen, New York Times, "Where Danes Butt Heads (Politely) With Their Leaders," 23 June 2018

Recent Examples on the Web: Verb

Another interpretation is that bitcoin is increasingly seen as a way to hedge against uncertainty, Sedunov notes. — Gregory Barber, WIRED, "The Serious Money Is Warming to Bitcoin," 16 Aug. 2019 And if interest rates do rise or investment discipline breaks down, there are ways to hedge against those eventualities. — Ed Christman, Billboard, "Future Looks Bright in Streaming Age, Say Wall Street Experts at AIMP Indie Music Publishing Summit," 11 June 2019 In a bid to avoid the worst, oil companies are starting to hedge. — Akshat Rathi, Quartz, "Oil companies are confused about the future of oil," 10 July 2019 Interest-rate swaps are contracts that allow users to hedge or bet on the cost of future interest payments. — Daniel Kruger And Telis Demos, WSJ, "New Benchmark Rate, Gunning to Replace Libor, Gains Traction," 29 Mar. 2019 One important factor could be that many Democratic donors are hedging their bets. — Tom Benning, Dallas News, "Here's how much money Democratic presidential hopefuls have raised so far in Texas to beat Trump," 8 Aug. 2019 But hedging costs can considerably shift the effective yield offered to overseas investors. — Mike Bird, WSJ, "Treasury Investors, Get Ready for the Japanese Cavalry," 26 June 2019 But within two months, Noble shocked investors again with a $129 million loss from a hedging bet on coal gone wrong. — Jack Farchy, Bloomberg.com, "Rags to Riches Tale Ends in Disaster for Noble Group's Elman," 29 Jan. 2018 Expectations hedged, there seems to be some progress. — Sidney Fussell, The Atlantic, "The Endless, Invisible Persuasion Tactics of the Internet," 2 Aug. 2019

Recent Examples on the Web: Adjective

Hedge fund managers will still get pinched, Mnuchin said. — Tory Newmyer, Washington Post, "The Finance 202: Here's how Louise Linton could change the tax debate," 23 Aug. 2017 Press Secretary Sean Spicer abruptly resigned Friday morning after President Trump made clear his intent to hire former hedge fund executive Anthony Scaramucci as his next communications director. — Zeke J Miller, Time, "A President Trump Staff Shake-Up," 21 July 2017 Hedge fund industry executive Anthony Scaramucci, an advisor to U.S. President Donald Trump, has been named chief strategy officer of the U.S. Export-Import Bank, a source familiar with the appointment said on Tuesday. — Reuters, Fortune, "Trump Ally Scaramucci Might Be Landing Post at Export-Import Bank," 28 June 2017 Once only a curiosity with strong appeal to libertarians and technologists, bitcoin's supporters now include hedge fund managers, titans of industry and a former Treasury secretary. — Tribune News Service, OregonLive.com, "Bitcoin moves beyond mere curiosity as value skyrockets," 7 June 2017 Other island residents include: pharmaceutical billionaire Phillip Frost and his wife, Patricia; hedge fund operator Wayne Holden; and Latin music power couple Gloria and Emilio Estefan. — Jennifer Boehm, Sun-Sentinel.com, "Star Island mansion formerly owned by Lennar co-founder listed for $49M," 1 June 2017 She and hedge fund manager James Matthews married at a church in rural England. — Kevin Scotta And Gregory Katz, chicagotribune.com, "An almost royal wedding: Pippa Middleton ties the knot in England," 20 May 2017 Hedge funds holding sales-tax bonds called Cofinas also sued to prevent Puerto Rico... — Andrew Scurria, WSJ, "Puerto Rico Creditors Sue Over Debt-Cutting Plans," 2 May 2017 A federal tax break that benefits hedge fund executives and other wealthy Wall Street investment managers will be targeted by President Trump's tax overhaul, a top White House official said Sunday. — Kevin Mccoy, USA TODAY, "Aide says Trump tax plan will target Wall Street carried interest deduction," 30 Apr. 2017

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'hedge.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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Last Updated

18 Sep 2019

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The first known use of hedge was before the 12th century

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More Definitions for hedge

hedge

noun

Financial Definition of hedge

What It Is

In finance, a hedge is a strategy intended to protect an investment or portfolio against loss. It usually involves buying securities that move in the opposite direction than the asset being protected.

How It Works

Let's assume part of your investment portfolio includes 100 shares of Company XYZ, which manufactures autos. Because the auto industry is cyclical (meaning Company XYZ usually sells more cars and is more profitable during economic booms and sells fewer cars and is less profitable during economic slumps), Company XYZ shares will probably be worth less if the economy starts to deteriorate. How do you protect your investment?

One way is to buy defensive stocks. These stocks might be from the food, utility, or other industries that sell products The definition of hedge on InvestingAnswers that consumers consider basic necessities. During economic slumps, these stocks tend to gain or at least hold their value. Thus, these stocks may gain when your XYZ shares lose.

Another way to hedge is to purchase a put option contract on the shares (this would essentially allow you to "lock in" a particular sale price on XYZ, so even if the stock crashed, you wouldn't suffer much). You could also sell a futures contract, promising to sell your stock at a set price at a certain point in the future.

Why It Matters

Hedging is like buying insurance. It is protection against unforeseen events, but investors usually hope they never have to use it. Consider why almost everyone buys homeowner's insurance. Because the odds of having one’s house destroyed are relatively small, this may seem like a foolish investment. But our homes are very valuable to us and we would be devastated by their loss. Using options to hedge your portfolio essentially does the same thing. Should a stock or portfolio take an unforeseen turn, holding an option opposite of your position will help to limit your losses.

Portfolio hedging is an important technique to learn. Although the calculations can be complex, most investors find that even a reasonable approximation will deliver a satisfactory hedge. Hedging is especially helpful when an investor has experienced an extended period of gains and feels this increase might not be sustainable in the future. Like all investment strategies, hedging requires a little planning before executing a trade. However, the security that this strategy provides could make it well worth the time and effort.

Source: Investing Answers

hedge

noun