The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “Does hedging a portfolio help or hurt?” Well, the answer to this question is it depends. It depends on what happens during the timeframe that you have the hedge in place for your portfolio. Now, of course, the idea of hedging a portfolio is the concept that we’re going to take a little bit of the portfolio’s account or income and purchase some sort of insurance or protection either in full or partial on the rest of the portfolio. The idea is that this hedge kicks into place when something bad happens. For example, in the insurance and housing business, this would be the homeowners insurance that you have on your house, so that if God forbid, the house were to burn down to the ground, the insurance would kick in and help repay to rebuild the house or relocate you and your family. It’s the same concept with options trading and with a stock portfolio. What most people do is they