Hedging against the stocks

[Claude90]

Nowadays, there are ways to make money whether the stock is up or coming down. One way is to hedge it against the newer derivatives, including stock options. This technique protects you and makes you money in the process and is a powerful investing tool.

[sara.corner007]

Hedging is a way of reducing some of the risk involved in holding an investment. There are many different risks against which one can hedge and many different methods of hedging. When someone mentions hedging, think of insurance. A hedge is just a way of insuring an investment against risk.

Consider a simple (perhaps the simplest) case. Much of the risk in holding any particular stock is market risk; i.e. if the market falls sharply, chances are that any particular stock will fall too. So if you own a stock with good prospects but you think the stock market in general is overpriced, you may be well advised to hedge your position.

[ClubZone]

Many people including me have learnt this the hard way after loosing some bucks but yes its always good to learn at some point.