At its core, a hedge is insurance of your investment portfolio against severe losses.

Any investment fund or experienced trader hedges its positions in order to be prepared if a negative scenario occurs in the market.

🤷‍♂️ We think most of you buy insurance for your car, travel, home, and so on.
But for some reason, most market participants neglect to insure their portfolio.

There are essentially only three ways to insure your portfolio, and each of these insurances has its own pros and cons:

1️⃣Опционы
In most cases, this is the cheapest way to insure your portfolio.
You can often insure your $20,000 portfolio against a fall for as little as $200.

Everything is very simple here, if the market falls sharply, and you have such insurance, then your option is filled with profit exponentially.
Thus, the option covers most of the losses by filling your account with a new cache.

But as hedge fund statistics show, 95% of options simply expire.
Therefore, such insurance must be constantly purchased again.

The advantage of options is that your loss is limited to the amount invested in the option, and as was said earlier, this amount is small relative to the entire portfolio.
And the potential profit is unlimited.

2️⃣ Futures
In our opinion, the most ineffective way to insure a portfolio.
With this approach, you simply open an opposite trade, for example, short.

You already know all the pros and cons of shorts very well.
In a strong bull market, using such an instrument may result in the loss of your entire deposit.

And the mathematical expectation of a short is always negative.


3️⃣ Free cache
Perhaps the simplest and most effective way to insure a portfolio.
You just need to have a cushion of free cache when the market is very overheated.
With this approach, in the event of a strong collapse, it will be possible to buy back the market and average out heavily unprofitable positions.

Disadvantages of this approach:
1. You can miss a strong upward market movement and, as a result, earn less.
2. If the market falls, you will have a loss on your existing positions.

But in our opinion, it is better to earn a little less than to bite your elbows in a severe collapse, destroying your nerve cells.

📊 Conclusion:
Hedging your portfolio$BTC $ETH $SOL very important during periods of severe market overheating.
Having one of the listed types of insurance, you will always be prepared for any scenario on the market.
And most importantly, your mental health will be fine.

You definitely shouldn't use shorts to hedge your positions; it's the worst way to protect your portfolio from a drawdown.
But the other 2 methods during periods of stress in the market can save your deposit from a large drawdown.

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