2 The Hedging Concept and Its Application

Options traders struggle endlessly with risk. Long-term options are expensive and short-term options expire too soon. How do you profit in this environment?

Hedging is an expansion of options combination strategies, designed to solve this problem. This is a conservative program for options used to manage a stock portfolio. By creating offsetting hedge positions, traders are able to generate profits in three conditions: underlying price rises, they fall, or they do not move at all. Safety within the hedge is created by the offsetting long/short and call/put option structures.

The Most Basic Hedge

With emphasis on profits in the markets, it is easy to overlook the equally important aspect of investing: ...

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