What Is a Hedge in the Stock Market?

Answers (3)

Hedge can be described as a process used for protection against loss (by a company) by making balancing or compensating contracts or transactions.

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Hedging is referred to as buying an asset designed to reduce the risk of losses from other assets. Hedging in finance is a risk management strategy that deals with reducing and eliminating the risk of uncertainties. It helps to restrict losses that may arise due to unknown fluctuations in the price of the investment.

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A hedge is a position that will protect your stock portfolio from the downside of the market, while also providing some profit potential.You can set up your hedge with multibagger stock futures or options, which are agreements to buy or sell stocks at a fixed price.

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