Standard models of hedging behavior assume that either hedgers wish to minimize net price variation or they wish to balance variation versus profits. These models treat variation as risk and fail to distinguish between variation that is random and variation that is not random over time. Newer models of decision making differentiate between random and nonrandom variation somewhat, but they inadequately distinguish variation from risk. This paper reviews the distinctions among variation, uncertainty, and risk and calculates optimal hedge ratios for two models addressing the distinction. Empirical optimal hedge ratios typically decline toward zero when variation aversion is included in the models. These results may help explain why hedgers commonly hedge less than recommended by the standard models.