What are the strategies used for Hedging?
Some of the common strategies followed in hedging are as follows.
- Asset allocation: While investing, the investor can hedge their risks by diversifying their portfolio into asset allocations that carry risk and assets that provide stable returns and balance their portfolio.
- Structuring the portfolio: Another type of hedging is the technique of structuring. Here the investor will invest a portion of their portfolio in debt and some in derivatives. Debt gives stability and derivatives to protect the investor portfolio from risk.
- Hedging by options: This technique involves call and puts options of assets. This helps the investor to safeguard their portfolio directly.