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.