De-hedging is the process of closing positions that were opened as a hedging tool in your portfolio. De-hedging involves returning to the market and closing hedged positions that were previously opened in order to limit the investor's risk of price fluctuations in relation to a particular asset.
De-hedging is carried out when the owners of the underlying asset are positive about their investments. Thus, the investor would rather prefer to remove his hedged positions and profit from the expected upward price movement of his investments.
An example of de-hedging can be a situation when an investor who has previously hedged on gold, seeing that the price for it is going to rise, buys out any futures contracts for gold that are available for sale on the futures market. By such actions, the investor earns a profit from the growth of the gold price in the case of a correct bullish forecast for gold.