How Does the Cost of Hedging (Premium) Affect the Overall Return of the Spot Position?

The cost of hedging, which is the premium paid for a Protective Put Option, directly reduces the overall return of the underlying spot position. This premium is a non-recoverable expense.

For example, if a crypto position gains 10% but the Put premium cost 2%, the net return is only 8%. Hedging is essentially an insurance cost; it limits potential losses but also slightly lowers maximum potential gains.