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A related term, delta hedging, is the process of setting or keeping a portfolio as close to delta-neutral as possible. In practice, maintaining a zero delta is very complex because there are risks associated with re-hedging on large movements in the underlying stock's price, and research indicates portfolios tend to have lower cash flows if re ...
Market participants are taking on a 'this is as good as it gets' mentality, and it may be time to think about hedging your portfolio against broader market risks
A hedge is an investment position intended to offset potential losses or gains that may be incurred by a companion investment. A hedge can be constructed from many types of financial instruments, including stocks, exchange-traded funds, insurance, forward contracts, swaps, options, gambles, [1] many types of over-the-counter and derivative products, and futures contracts.
A typical option strategy involves the purchase / selling of at least 2-3 different options (with different strikes and / or time to expiry), and the value of such portfolio may change in a very complex way. One very useful way to analyze and understand the behavior of a certain option strategy is by drawing its Profit graph.
This options trading strategy is the flipside of the long put, but here the trader sells a put — referred to as “going short” a put — and expects the stock price to be above the strike ...
Collars, a hedging strategy combining puts and calls, is getting more popular, said bankers. ... Companies are also using exotic options to structure strategies that cover their future cash flow ...