Futures For You by Carley Garner
HEDGING STOCK RISK WITH FUTURES (PART 1 OF 2)
Is there an efficient way to hedge stock portfolio risk in the futures and option markets?
The futures and option markets exist today because of the need for farmers and other agricultural producers and end users to hedge price risk. As a result, they are the most efficient means of hedging price exposure of any product listed on the futures exchanges, including stock index risk. However, donít mistake efficient for cheap; in all walks of life, insurance is an expensive luxury. Further, even the most efficient suite of hedging vehicles in the world has flaws. Letís take a closer look...