What Is Hedge?
A defensive investment or strategy used to offset or reduce the risk of an existing position. Common hedges include buying put options to protect against stock declines or using bonds to offset equity volatility.
Hedge across 2 exams
Hedge appears on the following exams. Each defines it in the context candidates are tested on:
- Series 7
- A defensive investment or strategy used to offset or reduce the risk of an existing position. Common hedges include buying put options to protect against stock declines or using bonds to offset equity volatility.
- Series 66
- An investment position or strategy designed to offset or reduce the risk of another position, typically using derivatives, short sales, or uncorrelated assets. Series 66 test-takers must understand hedging as a legitimate risk-management tool distinct from speculative trading.