A position established with the specific intent of protecting an existing position. For example, an owner of common stock may buy a put option to hedge against a possible stock price decline.
See Also:
Hedge: A conservative strategy used to limit investment loss by effecting a transaction which offsets an existing position. Hedging is taking a position through options or futures opposite to the current position they hold in the market.
Position: The total of a trader's open contracts - the combined total of antrader's open option contracts (calls and/or puts) and long or short stock.
