A hedge which is designed to reduce or eliminate the risk associated with a single asset in a portfolio rather than the entire portfolio. If the future movement of a single asset is very volatile or uncertain, a micro hedge could be established by taking an offsetting position in that asset using futures or options. For example, if an investor holding a portfolio wants to eliminate adverse price movements associated with a component stock, an offsetting short position could be taken in futures contracts on that same stock.
The micro hedge is the opposite of a macro hedge.
