Options Hedging Strategies
Protective puts, collars, and defined-risk structures for studying downside protection.
Protection has a cost
Options can be used to define or reshape portfolio risk, but a hedge can reduce returns, expire unused, or behave differently than expected. The best hedge depends on the actual exposure, time horizon, liquidity, tax situation, and objective.
Start with structure
Protective puts establish a potential floor for a limited period. Collars use a short call to offset some put cost while capping upside. Defined-risk spreads can target a range but do not protect every portfolio scenario.