How Do Options Trading Strategies Protect against Market Volatility Caused by Large Trades?

Options contracts, particularly puts and calls, allow traders to hedge against adverse price movements without executing the underlying large trade directly. For example, a trader executing a large buy order could buy a put option to protect against a sudden drop in price after the purchase.

This is a form of insurance, allowing the trader to manage the volatility risk inherent in the market impact of their own large trade.