Hedge

About Hedge:

Hedge or hedging is a strategy used to offset business or investment risk. A perfect hedge eliminates the possibility of future gain or loss. Futures hedging gains are taxable ordinary income, but futures hedging losses are capital losses and are deductible only to the extent of capital gain income (plus $3,000 for individuals). See mark-to-market rule. Former IRC (check if this IRC provision is current here) § 1256(e)(2).

Hedging Transactions in the U.S. and other Developed Countries International Tax Meaning

Transaction where a person tries to protect himself against price, interest rate or foreign exchange rate fluctuations, for example, by buying or selling commodities or currencies using derivative contracts such as forwards, futures, options and swaps.

See also Capital Gain in the American Legal Encyclopedia and Capital Gain in the World Legal Encyclopedia.