“Micro-hedging”

definition

Micro-hedging is a strategy that hedges each transaction as they occur. Unlike in other strategies where users take protective action after reaching a certain nominal threshold, micro-hedging executes individual exposures immediately.

This strategy benefits companies who have high transaction volumes and low amounts, such as e-commerce firms, travel agencies, tour operators, and AdTech companies.

For example, an online travel agency books hundreds of hotel beds a day in multiple currencies.  Instead of waiting for a certain nominal amount of payables/receivables to come in before hedging, they instead hedge each transaction.  This way, they protect their profit margins, revenue, and obligations from the FX market at the start of the exposure.