Strategies

Hedging

Hedging is a strategy to get portfolio protection. A risk management strategy employed to offset losses in investments by taking an opposite position in a related asset, it protects an investment from risky situations that might lead to financial losses. As it does not guarantee complete assets protection, Hedging makes sure that losses will be mitigated by gains in another investment. The reduction in risk provided by hedging also typically results in a reduction in potential profits. Hedging strategies typically involve derivatives, such as options and futures contracts.

Asset Classes

Future
Option

Strategies

Asset Protection
Diversification

Terms

Arbitrage
Derivative
Risk Analysis

Mentioned by the Following

Asset Classes

Silver

Entities

AVM
Abaxx Exchange
Adage Capital Management
Appaloosa Management
Applied Investment Strategies
Aristeia Capital
Aspect Capital
Bannockburn Global Forex
Bodhi Tree Asset Management
Carlson Capital
Caxton Associates
Concise Capital Management
Crestline Investors
Della Parola Capital Management
Dorsey Asset Management
Elliott Investment Management
GFM Asset Management
Genesis
Genesis Capital
Greylock Capital Management
Hackett Financial Advisors
Hull Trading Company
Huygens
J Ganes Consulting
KKM Financial
Loop Capital Markets
Macquarie Group
New Century Advisors
Oceanwood Capital Management
Options Insight
QVR Advisors
RCM Alternatives
REX Shares
Record Currency Management
Renaissance Technologies
Rimrock Capital Management
Societe Generale Corporate and Investment Banking
SpiderRock Advisors
StoneX Group
Swan Global Investments
Tocqueville Bullion Reserve
Voss Capital
Winhall Risk Analytics

People

Aaron Brown
Aaron Uitenbroek
Adam Golden
Adam Grimes
Adam O'Dell
Amelia Bourdeau
Anas Alhajji
Andreas Clenow
Andrew Saunders
Angie Setzer
Ankit Sahni
Ari Paul
Ari Pine
Arik Ben Dor
Ashraf Laidi
Barry Knapp
Benoit Bosc
Bill Enszer
Bill Poulos
Blair Hull
Bob Iaccino
Bob Savage
Bobby Schwartz
Brannigan Barrett
Brett Friedman
Brett Whysel
Brian Taylor
Carley Garner
Carlos Sanchez
Cem Karsan
Chiente Hsu
Chris Blasi
Chris Hausman
Chris Tyrer
Christian Fromhertz
Christine Breck
Christine Sandler
Colleen Sullivan
Dan Morris
Dan Passarelli
Daniel Lacalle
Daren Riley
Darius Sit
David Mascio
David Shimko
David Tawil
David Truffelman
Davis Edwards
Dean Curnutt
Denise Shull
Diego Parrilla
Don Singletary
Donald van Deventer
Douglas Borthwick
Eddy Zuaiter
Ellen Safir
Elliott Allswang
Euan Sinclair
Evan Katz
Fischer Black
Francesca Taylor
Francesco Martoccia
Francis Hunt
Galen Burghardt
Gareth Soloway
Gavin von Loeser
George Pruitt
Gianna Bern
Glenn August
Greg Lippmann
Greg Williamson
Guillermo Dumrauf
Guy Keller
Haim Bodek
Hari Krishnan
Henry Ma
Ian Armstrong
JM Mognetti
Jakub Rehor
James Clunie
Jamie Coutts
Jared Dillian
Jason Buck
Jason Gerlach
Jeff Kilburg
Jeffrey Christian
Jeffrey Mettel
Jim Dunn
Joe Hurley
Joe Perry
Joe Raia
John Bailey
John Gottfurcht
John Kosar
John Murphy
John Netto
Jon Najarian
Jonas Thulin
Jonathan Treussard
Judy Ganes-Chase
Jurgen Muhlhauser
Kathy Lien
Keith Black
Kevin Murcko
Kevin Nugent
Lars Hoffmann
Lars Seier Christensen
Lex van Dam
Mahmood Noorani
Maleeha Bengali
Marc Chaikin
Marcus Ashworth
Mark Lieb
Mark Newton
Martin Pelletier
Matt Rowe
Max Wolff
Maziar Minovi
Meb Faber
Michael Ashton
Michael Corcelli
Michael Covel
Michael Gettings
Michael Kahn
Michael Kao
Michael Lebowitz
Michael Rulle
Mikael Sarwe
Mike Drury
Mike Khouw
Mike Kurz
Mish Schneider
Moorad Choudhry
Mustafa Chowdhury
Neal Triplett
Ole Hansen
Ophir Gottlieb
Patricia Hemsworth
Patrick Perret-Green
Paul Johnson Jr.
Paul Tanner
Peter Lacalamita
Ram Ahluwalia
Rhona O'Connell
Richard Sandor
Rick Bensignor
Rob Davis
Said Haidar
Saker Nusseibeh
Sam Dunlap
Scott Skyrm
Shannon McConaghy
Shawn Hackett
Slobodan Jovanovic
Steve Ehrlich
Steve Miley
Steve Sosnick
Sudhu Arumugam
Sven Miserey
Tammy Sullivan
Tariq Dennison
Thejas Nalval
Theodore Barnhill
Tor Svelland
Trevor Neil
Vince Sarullo
Vincent Catalano
Vishal Mehta
Xavier Rolet
Zed Francis

Publications

Advanced Financial Risk Management
Advanced Portfolio Management
Advances in the Valuation and Management of Mortgage-Backed Securities
Bank Asset and Liability Management
Beyond Value at Risk
Building Wealth with Silver
Bullsh*t Free Guide to Butterfly Spreads
Create Your Own Hedge Fund
Dynamic Hedging
Equity Derivatives
Eurodollar Futures and Options
Fixed Income Markets
Get Rich with Options
Handbook of Mortgage-Backed Securities
Handbook of Portfolio Management
Hedging Commodities
Higher Probability Commodity Trading
How To Hedge
Leveraged Finance
Mastering the Commodities Markets
Measuring and Controlling Interest Rate and Credit Risk
Option Volatility and Pricing
Options Strategies for the Stock Investor
Perspectives on Interest Rate Risk Management for Money Managers and Traders
Professional Perspectives on FIPM
Risk Management in Trading
Stock Options Trading
Strategic Risk Taking
Tail Risk Hedging
The Basics of Financial Econometrics
The Futures Bond Basis
The Handbook of Asset/Liability Management
The Handbook of Fixed Income Options
The Little Book of Hedge Funds
The Market Taker's Edge
The Second Leg Down
The Treasury Bond Basis
Vasuda Healthcare Analytics

Terms

Derivative
Risk Management

Aaron Brown

Aaron Uitenbroek

Adam Golden

Adam Grimes

Adam O'Dell

Amelia Bourdeau

Anas Alhajji

Andreas Clenow

Andrew Saunders

Angie Setzer

Ankit Sahni

Ari Paul

Ari Pine

Arik Ben Dor

Ashraf Laidi

Barry Knapp

Benoit Bosc

Bill Enszer

Bill Poulos

Blair Hull

Bob Iaccino

Bob Savage

Bobby Schwartz

Brannigan Barrett

Brett Friedman

Brett Whysel

Brian Taylor

Carley Garner

Carlos Sanchez

Cem Karsan

Chiente Hsu

Chris Blasi

Chris Hausman

Chris Tyrer

Christian Fromhertz

Christine Breck

Christine Sandler

Colleen Sullivan

Dan Morris

Dan Passarelli

Daniel Lacalle

Daren Riley

Darius Sit

David Mascio

David Shimko

David Tawil

David Truffelman

Davis Edwards

Dean Curnutt

Denise Shull

Diego Parrilla

Don Singletary

Donald van Deventer

Douglas Borthwick

Eddy Zuaiter

Ellen Safir

Elliott Allswang

Euan Sinclair

Evan Katz

Fischer Black

Francesca Taylor

Francesco Martoccia

Francis Hunt

Galen Burghardt

Gareth Soloway

Gavin von Loeser

George Pruitt

Gianna Bern

Glenn August

Greg Lippmann

Greg Williamson

Guillermo Dumrauf

Guy Keller

Haim Bodek

Hari Krishnan

Henry Ma

Ian Armstrong

JM Mognetti

Jakub Rehor

James Clunie

Jamie Coutts

Jared Dillian

Jason Buck

Jason Gerlach

Jeff Kilburg

Jeffrey Christian

Jeffrey Mettel

Jim Dunn

Joe Hurley

Joe Perry

Joe Raia

John Bailey

John Gottfurcht

John Kosar

John Murphy

John Netto

Jon Najarian

Jonas Thulin

Jonathan Treussard

Judy Ganes-Chase

Jurgen Muhlhauser

Kathy Lien

Keith Black

Kevin Murcko

Kevin Nugent

Lars Hoffmann

Lars Seier Christensen

Lex van Dam

Mahmood Noorani

Maleeha Bengali

Marc Chaikin

Marcus Ashworth

Mark Lieb

Mark Newton

Martin Pelletier

Matt Rowe

Max Wolff

Maziar Minovi

Meb Faber

Michael Ashton

Michael Corcelli

Michael Covel

Michael Gettings

Michael Kahn

Michael Kao

Michael Lebowitz

Michael Rulle

Mikael Sarwe

Mike Drury

Mike Khouw

Mike Kurz

Mish Schneider

Moorad Choudhry

Mustafa Chowdhury

Neal Triplett

Ole Hansen

Ophir Gottlieb

Patricia Hemsworth

Patrick Perret-Green

Paul Johnson Jr.

Paul Tanner

Peter Lacalamita

Ram Ahluwalia

Rhona O'Connell

Richard Sandor

Rick Bensignor

Rob Davis

Said Haidar

Saker Nusseibeh

Sam Dunlap

Scott Skyrm

Shannon McConaghy

Shawn Hackett

Slobodan Jovanovic

Steve Ehrlich

Steve Miley

Steve Sosnick

Sudhu Arumugam

Sven Miserey

Tammy Sullivan

Tariq Dennison

Thejas Nalval

Theodore Barnhill

Tor Svelland

Trevor Neil

Vince Sarullo

Vincent Catalano

Vishal Mehta

Xavier Rolet

Zed Francis



Equity Hedging Strategy Using Beta

  1. Find the Beta of each stock in the portfolio
  • Find the Beta or the portfolio (multiply weight of each stock in portfolio by its individual Beta and sum)
  • Find a mix of two common market ETFs with different Betas to match your portolio Beta:
    1.    Ex.  SPY has Beta of 1.00, QQQ has Beta of 1.19
    2.    Ex.  Solve for X:  X * (1.00) + (1 - X) * 1.19 = 1.12 ;   X = .37
    3.    Ex.  37% of Hedge should be SPY, 63% of Hedge should be QQQ 
  • Buy put options on the respective amounts from step 3 to help hedge your portfolio
    1.    Ex:  Buy 37,000 notional of SPY puts
    2.    Ex:  Buy 63,000 notional of QQQ Puts