Are you nervous to hedge?
Do you even realize what hedging is?
Let's start from the beginning.
Jay Pestrichelli, co-founder of ZEGA Financial, explained what hedging is in an interview with TheStreet.
"Hedging is about protection. You know, the term itself gets a little confusing because people think hedge funds, but that's not what really we mean when we talk about hedging, we talk about limiting risk. We talk about actually controlling and managing risk," explained Pestrichelli. "When we talk about hedging, you've probably heard the term hedging your bets. It's exactly what we talk about. When it comes to the reality of implementing hedging, it's all about defining how much risk you're willing to take. And for us, we like to tell people, being hedged allows you to stay in the market, stay invested, but limiting your downside, almost putting a floor in portfolios."
In Jim Cramer's daily live show with TheStreet, he explained why nervous investors should be cautious when hedging.
"If you want to hedge, go into cash," said Cramer. "If you want to hedge, raise cash. It is too hard to match options with your portfolio. If you are nervous, just raise cash."