Part 1 Ride The Big Moves Hedging with Options
One of the most practical uses of options is hedging, which means reducing risk exposure in an existing portfolio.
For example, suppose you own 1,000 shares of Reliance Industries at ₹2,500 each. You worry about short-term market declines. You can buy put options with a strike price near ₹2,450.
If the price drops, your stock loses value — but the put option gains value, reducing your overall loss.
Similarly, farmers, exporters, and institutions often use options to lock in prices and protect against adverse moves in commodities, currencies, or interest rates.
