Hi, I’ve known about future/forward contract but when getting into hedge, I’m extremely confused. I know the purpose of hedging is to diverse away the risk of getting money loss, also decrease the opportunity to gain large. I just don’t get how it work/process in reality.
In: Economics
Hedging in general just means buying another investment to offset the risk of another.
For example, One could sell a call option and simultaneously buy a cheaper (worse) call option. The former would gain money while the latter will offset the infinite risk of selling calls.
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