{"id":966588,"date":"2024-12-09T14:55:10","date_gmt":"2024-12-09T12:55:10","guid":{"rendered":"https:\/\/www.etoro.com\/?page_id=966588"},"modified":"2024-12-09T14:55:11","modified_gmt":"2024-12-09T12:55:11","slug":"hedge-your-portfolio-with-options","status":"publish","type":"page","link":"https:\/\/www.etoro.com\/en-us\/academy\/videos\/hedge-your-portfolio-with-options\/","title":{"rendered":"Hedge Your Portfolio With Options"},"content":{"rendered":"\n

Description<\/h2>
Put options allow you to \u201chedge\u201d your position, meaning you can (in theory) protect your gains for a limited amount of time. Learn how in this video.<\/div><\/div>

Transcript<\/h2>
\n

Options allow you to engage with the market in different ways than stocks.<\/p>\n\n\n\n

One of those ways?<\/p>\n\n\n\n

Hedging.<\/p>\n\n\n\n

Hedging is just a fancy finance term for protecting your investments against risk.<\/p>\n\n\n\n

With options there’s a simple way you can do that.<\/p>\n\n\n\n

Suppose you own 100 shares of Toastr, an exciting but risky company that produces smart toasters.<\/p>\n\n\n\n

You bought your shares at ten dollars and now they’re 20 bucks a piece meaning you have a thousand dollars of profit, and even though Toastr seems to be handling economic turbulence well, they’re getting nervous.<\/p>\n\n\n\n

It’s a tech company and the stock price of tech companies and that sector often seriously tumble in tough times.<\/p>\n\n\n\n

So, you start to think: maybe I should hedge.<\/p>\n\n\n\n

Well, here’s how that would roughly work.<\/p>\n\n\n\n

If you bought a put option that expires in one year, you would likely be able to purchase it for only a small fraction of Toastr stock price.<\/p>\n\n\n\n

Let’s say the put options contract with a strike price of twenty dollars costs a hundred dollars.<\/p>\n\n\n\n

That’s ten percent of your total investment in return.<\/p>\n\n\n\n

As the value of your Toastr stock goes down, the value of your put option goes up.<\/p>\n\n\n\n

More or less, the put option ensures that you lose less than you would with just a stock investment.<\/p>\n\n\n\n

And that’s hedging.<\/p>\n\n\n\n

Options allow you to engage with the market in new and exciting ways.<\/p>\n\n\n\n

They’re not for everyone, but for those who are ready to take the plunge, explore eToro options today.<\/p>\n<\/div>