Plain-language definitions of 133 terms used in raw material trade: Incoterms, payment, shipping, customs, quality documents, plastics, metals, chemicals, agriculture and energy.
Offsetting the price risk of physical buying and selling by taking an opposite position in derivatives such as futures, forwards, options or swaps. A cable maker taking copper in three months can buy LME copper futures today to protect against a price rise, while a trader that has sold at a fixed price sells futures. Forward FX contracts manage currency risk in the same way. Hedging is not speculation: the aim is to protect the margin rather than to make a profit, though margin calls and basis risk must be managed.
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