A hedge is an investment tactic or trade designed to mitigate or neutralize the risks of unfavorable price movements in an asset or portfolio. The goal of a hedge is to minimize potential losses by using a counterbalancing investment that acts as a protection against potential market downturns or volatility.
Hedges are commonly used by investors to manage risks and protect their investments, particularly in volatile markets. By employing a hedging strategy, investors can reduce the potential impact of negative market movements, which can help to stabilize their portfolio and protect against significant losses.