Hedging with Options and Futures

Hedging with Options and Futures

Hedging is a strategy used to offset potential losses in investments by taking an opposite position in a related asset.

Options and futures can be effective tools for hedging against market volatility. AI 관련주

• Options Contracts: Options give the right, but not the obligation, to buy or sell an asset at a predetermined price, offering protection against adverse price movements.
• Futures Contracts: These binding agreements to buy or sell an asset at a future date can lock in prices and hedge against market fluctuations.

Understanding and Managing Leverage

While leverage can amplify returns, it also increases potential losses. Understanding and managing the amount of leverage used in investment activities is crucial for risk management.

• Margin Requirements: Monitoring margin requirements and ensuring they are met to avoid forced liquidation.
• Risk Exposure: Keeping the leveraged portion of the portfolio within limits that are manageable even in downturns.