Hedge

A hedge is an investment position taken to reduce the risk of adverse price movements in another asset. Options are commonly used as insurance for stock portfolios.

By buying puts, an investor can cap the potential losses on a long stock holding. Hedging reduces volatility and provides peace of mind.

It is a fundamental application of financial derivatives.

Insurance
Hedge Frequency
Cost Reduction
Naked Short
Portfolio Insurance
Limited Profit
Bearish Strategy
Downside Protection