Risk hedging is a very effective method to manage interest rate risk, exchange rate risk, stock risk and commodity risk. Different from the risk diversification strategy, risk hedging can manage systematic risk and non-systematic risk, and can also reduce the risk to the expected level by adjusting the hedging ratio according to the risk tolerance and preference of investors. The key problem of risk management by using risk hedging strategy lies in the determination of hedging ratio, which is directly related to the effect and cost of risk management. Risk hedging case: If you buy a stock at the price of 10 yuan, the stock may rise to 15 yuan or fall to 7 yuan in the future.
Your expectation of income is not too high. More importantly, you hope that if the stock falls, your loss will not be as high as 30%. What can you do to reduce the risk of stock falling? One possible scheme is: you buy a put option of this stock at the same time-an option is a right (not an obligation) that can be exercised in the future. For example, the put option here may be the right to "sell this stock at 9 yuan price one month later"; If the stock price is lower than that of 9 yuan after one month, it can still be sold at the price of 9 yuan, and the issuer of the option must accept it in full; Of course, if the share price is higher than that of 9 yuan, you will not exercise this right (wouldn't it be better to sell it at a higher price in the market).
In view of this option, the issuer of the option will charge you a certain fee, which is the option fee. Originally, your stock may bring you 50% profit or 30% loss. When you buy a put option with the strike price of 9 yuan at the same time, the profit and loss situation changes: the possible gains become. (15 yuan-10 yuan-option fee)//0 yuan and the possible loss becomes: (10 yuan -9 yuan+option fee)/10 yuan, and the potential gains and losses are even smaller. By buying put options, you pay a part of the potential benefits, in exchange for avoiding risks.