The Flexibility of Options Hedging
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The purpose of hedging is reduction or even elimination of market risk. This adds a dimension to options trading. Once considered as only speculative and high risk, the hedging strategy to options trading allows the options market to function as a risk management utility. This enables a conservative investor with an equity portfolio to employ options with conservative strategies, generating added income while reducing risks. In the ideal outcome, market risk can be eliminated so that the equity position is no longer exposed to potential losses even if the markets decline significantly.