Co-founder of the investment platform "Investman"
Successful work in the financial market is impossible without a competent risk management strategy. For this, there is such an effective technique as hedging, which allows you to optimize the investment process.
Nikolay Solodovnikov, financial analyst, expert bolivia whatsapp phone number in attracting private investment in small and medium businesses and co-founder of the investment platform Investman, spoke about the features and possibilities of using hedging.
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Content
Introduction
Types of hedging
Tools
Hedging in finance
Examples of hedging use
The difference between hedging and insurance
Advantages and disadvantages
How to protect your savings
Conclusion
Introduction
Hedging is suitable for both large companies and small investors. It is a kind of insurance against losses that works by using transactions that cover the loss of the main investment.
Hedging is used mainly in stock exchange activities if a market participant fears a decrease in the price of acquired assets or an increase in the price of sold assets.
Or, for example, when investing in the crowdlending market, i.e. when individuals lend to organizations, hedging can be considered a competent diversification of the portfolio across many different projects. Such tactics are always preferable to investing large amounts in individual projects.
Types of hedging
You can insure risks by including hedging in the list of strategies used and using different types of this method:
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Classic . When the opening of a hedged position occurs after the main transaction has been completed.
Full . Here the volume of the main transaction coincides with the volume of the counter transaction.
Partial . This is protection of part of the main position from certain risks, for example, currency risks.
Anticipatory . That is, occurring before the main transaction is completed.
Tools
Choosing the right financial instruments plays a crucial role in success. Let's look at what they include.
Futures contract . An exchange transaction to buy or sell an underlying asset in which the parties to the transaction agree on a price and timing of execution with a specific date and price.