A Hedge is a risk management strategy used to reduce or offset potential losses in an investment by taking an opposite position in a related asset.
Hedging is used by investors and businesses to protect against price fluctuations in markets such as stocks, commodities, currencies, and interest rates.
Instead of aiming for profit, a hedge aims to minimize losses if the market moves unfavorably. It is commonly done using financial instruments like futures, options, and derivatives.
"An investor buys a stock and also buys a put option on the same stock. If the stock price falls, the loss is reduced due to the option."