A Hedging Strategy is a risk management technique used to reduce or offset potential losses in investments by taking an opposite position in a related asset.
Hedging is often compared to insurance for investments. Investors use financial instruments like derivatives to protect against price fluctuations, currency risk, or market volatility.
It is widely used in markets regulated by the Securities and Exchange Board of India and involves tools such as futures, options, and swaps.
"An investor holding stocks buys put options to protect against a fall in stock prices."