Hedge in trading securities is the process of minimizing loss potential by buying or selling a security that would move in the opposite direction of the primary traded security. If a trader shorts 100 shares of ABC, hedging this trade from a possible loss would be to buy a call option so that if the security moves up instead of down, the trader can simply exercise the option at a profit and close the losing short trade.

Stocks | Forex | Options | Economics | Bonds | History | Language learning | Technology | Technical Analysis | Fundamental Analysis
Copyright © 2014 econtrader | Risk disclosure | Terms of Use