Real-world example
You hold ₹10L of stocks. You are scared of a crash relative to the election results. You buy a Nifty Put option to protect your downside.
Knowledge base
Hedging
Taking a trade specifically to reduce the risk of an existing investment.
Explain like I’m 5
- Think of it like buying insurance for your portfolio.
- If you own stocks (which you want to go up), you might buy a 'Put Option' (which makes money if market goes down).
- If the market crashes, your stocks lose value, but your Put Option makes money, offsetting the loss.
See it in PortoAI
Visualize how your hedges protect you.