Hedging is used in trading to reduce risk. In summary, it involves taking both a primary and counter position to limit potential losses. Here's 7 different ways to do it.
can also act as a hedge. Different cryptos may respond differently to market changes. If one falls, another may rise and offset that loss.Let’s say you own $10,000 worth of BTC and you want to hedge against a possible decrease in its price. You can consider doing the following to hedge your position.
If bitcoin's price falls to $40,000, you can exercise your option and sell your bitcoin for $50,000, significantly reducing your losses. The cost of this hedge would be the premium you paid for the option. In this example, you would need 0.2 BTC to cover your portfolio. The cost would be 0.01 BTC .
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