Hedgers use futures contracts to minimize risk from unpredictable price changes. There are two types of hedges - short hedges where selling futures offsets losses if prices fall, and long hedges where buying futures offsets losses if prices rise. The optimal hedge ratio balances minimizing risk against the imperfect correlation between the hedged asset and futures contract. Hedgers aim to reduce but not necessarily eliminate risk, as eliminating all risk may require holding an unrealistic number of futures contracts.