What is an anticipatory hedge?

An anticipatory hedge is a strategy where options and futures are used to lock in the price of assets that will be purchased in the future, even now. This is done to protect against potential price rises or market volatility. By fixing the price of future purchases, an investor or company can gain certainty regarding the costs, which aids in planning and managing financial risks. This method is comparable to forward investing, where positions are also taken in anticipation of future transactions.