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Hedging implies selling and buying the same assets in order to reduce risk. Loss on one side is neutralized the gain on the other side. Perfect hedge means completely neutralized loss, but many hedgings are not perfect.

Hedging operations are typically applied to options and futures.

Hedging with futures is achieved by taking the opposite position than the one you have. For example, if investor holds a long position on some security he protects himself by opening a short position on future contract.

In hedging operations with options different strategies can be applied: protective put option, protective call option, straddle, spread, collar etc.

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Protective put option >