Hedging

Hedging means protecting an investment against loss caused by fluctuations of prices in the market. It also means to counter balance the risk of loss with other transactions. Dealers in stock make future contracts, based on forecast, to make profit. In case of wrong forecast, the dealers wish to transfer some part of the loss to the shoulders of others by making another contract with them. This process of risk transferring through additional contracts is called ‘Hedging’.

Bear

A bear is a very special trader who is engaged in speculative business. He sells his bills and securities at present when the price is high and buys in future when the price is low. In this way simply by speculation, he earns his profit because of difference in the buying and selling prices. A Bear usually neither delivers the goods nor accepts the price, till a specified time in future. A Bear is taken as a gloomy businessman as he hopes for a decrease in the price of goods in future. This speculator is known as Bear Operator and in America he is known as ‘Short’ or ‘Short Dealer’.