What is Hedging in the Stock Market? -

Shalomabhi22 Nov, 2021Finance

Hedging is similar to insurance. It limits your loss to a certain known amount. Just like home insurance, you pay a certain fixed amount each month or each quarter. If one night, your house suffers from a fire, the insurance coverage will take care of the damages to the property. Hedging generally involves the application of derivatives, such as options and futures contracts to create positions that would offset those losses.