Hedging means accepting some cost or capped upside in exchange for reduced downside. It's insurance, and like insurance it has a premium.
Common approaches
- Holding cash or short-duration bonds to cushion drawdowns.
- Diversifying into assets with low correlation to your core holdings.
- Options (e.g., protective puts) — powerful but complex and with real costs.
- Reducing position sizes in your most concentrated bets.
Match the hedge to the risk
The cheapest 'hedge' is often simply not being over-concentrated in the first place. Use XMarketPro's portfolio risk tools to find where your real exposure is before paying for protection.
Nothing here is investment advice — hedging with derivatives carries significant risk and isn't right for everyone.