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.
Experts
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
Chris Vermeulen
Christian Fromhertz
Christine Breck
Christine Sandler
Colleen Sullivan
Dan Morris
Dan Passarelli
Daniel Lacalle
Daren Riley
Darius Sit
Darrell Duffie
David Mascio
David Shimko
David Tawil
David Truffelman
Davis Edwards
Dean Curnutt
Denise Shull
Diego Parrilla
Don Singletary
Donald van Deventer
Douglas Borthwick
Drew Bradford
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
Will Peets
Xavier Rolet
Zed Francis
- Hedging is not an investment strategy in itself
- Hedging is a form of insurance - you only need it when you're doing something else
Equity Hedging Strategy Using Beta
- Ex: MSFT has beta 2.00 and is 20% of your Portfolio (20k)
- Ex: MO has beta of .90 and is 80% of your Portfolio (80k)
- Ex. SPY has Beta of 1.00, QQQ has Beta of 1.19
- Ex. Solve for X: X * (1.00) + (1 - X) * 1.19 = 1.12 ; X = .37
- Ex. 37% of Hedge should be SPY, 63% of Hedge should be QQQ
- Ex: Buy 37,000 notional of SPY puts
- Ex: Buy 63,000 notional of QQQ Puts