Commercial Hedger

This can also apply to the guys you pay to trim your hedges. But that's not what we're talking about here. Instead, this term has to do with the commodities market.

Some companies rely heavily on particular commodity. A peanut butter manufacturer will have its profits heavily reliant on the price of peanuts. A maker of gold lame (pronounced luh-may, or maybe lame, depending on how uncool it is) jackets worries about the price of gold (and maybe rhinestones too, but we're not sure you can hedge those prices). And so on...

A commercial hedger is one of these companies that hedges its commodity position in order to eliminate the risk that prices will rise dramatically. To do this, they use futures contracts, which give the company the option to buy a quantity of a product at a set price at some point in the future. This way, the firm can lock in a price for the commodities it needs. They might grumble a little down the road if prices happen to fall, but at least they won't be in line for a nasty surprise if prices surge.