A hedge is an investment position intended to offset potential losses or gains that may be incurred by a companion investment.

What does it mean to hedge an option?

Hedging with options involves opening a position – or multiple positions – that will offset risk to an existing trade. This could be an existing options position, another derivative trade or an investment.

What does it mean to hedge assets?

Hedging against investment risk means strategically using financial instruments or market strategies to offset the risk of any adverse price movements. ... So, hedging, for the most part, is a technique that is meant to reduce potential loss (and not maximize potential gain).