The futures markets' original role was to provide a means to manage risk. For instance, a farmer growing wheat on his farm is satisfied with the price the futures market says he can get in 3 months for his crop, so he decides to take some risk off his chest by establishing a short position in the wheat futures contract. Similarly, a bakery claims they can make a decent profit in a couple of months using wheat at a price suggested by the futures market, so they decide to lock in this profit by opening a long position in the wheat futures contract.
As easy as it is to understand it using a commodity futures as an example, the same thing cannot be said about financial futures. Let us consider T-Note futures. If you own a bond portfolio and are concerned about the loss of its value due to interest rate rise, you can hedge this risk by opening a short position in the T-Note futures market. Having said that, how can there ever be a hedging LONG position? Who can be a hedger opening a LONG position in this contract? Nothing really comes to my mind in this respect. Can anyone be so kind to share their thoughts on this, or give a practical example of a hedger with LONG positions in T-Note market?
the hedging long in one contract month can be offset by a hedging short on another maturity
if you think the yield curve will take a certain evolution, that's one reason why a party could be hedging long
or it could be an exchange traded multi-leg strategy
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