Hedging is like an insurance for any negative event that might occur in the market that could damage your investments.
For example, if you buy insurance for your car, you’re hedging against thefts, accidental damages or any other unforeseen disasters.
Many portfolio managers, investors, and small and large corporations use hedging to lessen their exposure to risks. But unlike the car example, hedging in financial markets is more complicated.
So if you’re still unclear about what is hedging, here’s a simple definition.
If the investment you are hedging against makes money, you will have normally reduced the profit that you could have made. But if the investment loses money, your hedge, if successful, will reduce that loss.
Let's see how this works with an example. Say you own shares of Reliance Industries. Although you believe in this company for the long run, you are a little worried about some short-term losses in the industry, you can buy Put option of a Specific strike price.
SUBSCRIBE for daily updates: univest.in
Follow us:
Instagram: / univest.in
Twitter: / inunivest
Facebook: / univest.in
LinkedIn: / univest-in
#univest #hedgingstrategy #hedging #tradingstrategy #stocktradingstrategies #stockmarketindia #stockmarketforbeginners