Which position do hedgers typically take in the market?

Hedgers typically take a short position in the market to protect against potential price declines in the assets they own or are planning to buy in the future. By selling futures contracts or other derivatives, hedgers aim to offset the risk of adverse price movements.

For example, if a farmer expects to harvest corn in a few months, they might sell corn futures contracts now at the current market price. This locks in their selling price and provides a hedge against the possibility that prices will drop by the time they actually sell their crop. By taking this short position, they can ensure that they receive a certain level of revenue even if market conditions change unfavorably.

In contrast, a long position would mean buying assets with the expectation that their value will rise, which is typically associated with speculators rather than hedgers looking to manage risk. A neutral position indicates no commitment in either direction regarding future price changes, which isn’t the strategy that hedgers employ. Finally, a variable position suggests uncertainty or flexibility in trading that does not align with the hunker-down strategy of hedging.