Skip to main content

What Is the Purpose of ‘Hedging’ with Financial Derivatives?

Hedging is a strategy used to reduce the risk of adverse price movements in an asset. Derivatives like futures and options are ideal for this.

For example, an investor holding a stock might buy a put option to protect against a drop in its price. The goal is not to profit from the derivative itself, but to offset potential losses in the underlying investment.

How Does Hedging with Derivatives Differ from Speculation?
What Is the Primary Purpose of Using Crypto Options for Hedging?
What Is the Primary Purpose of Using Derivatives for Hedging in the Crypto Space?
Define “Hedging” and How Derivatives Are Used for This Purpose