Construction materials cost estimation is considered one of the most important tasks in the development of project budget. Using material hedging to mitigate the risk of material price volatility is a new concept for construction companies. This thesis matched material hedging with the fuel hedging application utilized by airlines. The weather hedging process was used as a precedent for material hedging application in the construction industry. This thesis developed a model to provide a step by step guidance to apply material hedging in the construction industry. Further, this thesis matched its model with the model presented by Macdonald (2013) and provided a lower level of detail to support actual implementation of material hedging. Future work in this area could be the investigation of material hedging cost to decide if the hedging application is feasible. Also, validity and reliability of the model presented by this thesis should be investigated.