Hedging is a term commonly used in investing but many investors don't understand it. This video will explain a few of the most common types of hedging strategies and how they are used. www.millionairecorner.com
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now i have to figure out when to use futures and when to use options. I got to the hedging part of my book. watched this video and another one, read one example in my book. got a headache, went to the gym. Now I am gonna continue the chapter on ethics and when I get to chapter 3 my questions will be answered. I was gonna dive into the derivatives and all tha jazz but i changed my mind after going to the gym.
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In the example about the stocks, you said that stock ABC can be hedged by a negatively correlated stock XYZ. But this would decrease my net returns on stock ABC since XYZ would fall in value when ABC increases. Is this true and something we have to live with when hedging?
That's the whole Point. say you buy $100 of ABC and $50 of XYZ. If ABC falls by 10%, you'll only be down 5% but if ABC goes up 10%, you will only be up by 5%. Risk Management
well you can't just go on hedging everywhere can you. Just telling everyone what you want and what your gonna do. We'd all be millionaires if we hedged all day now wouldn't we. How many times can you hedge?
