Micro-Hedge
Categories: Derivatives
Tiny topiaries.
The term "hedge," at least in finance, generally refers to any attempt to lower the risk of a particular action. If you’re going to drive fast and furiously, a seat belt is a hedge against crashing. You don’t plan to skid out of control, but if you do...you’ll be glad you were buckled in.
As the name suggests, the distinction for a micro-hedge comes from its scale. You have a large portfolio filled with many diverse investments. Stocks. Bonds. Baseball cards. The socks Abe Lincoln was wearing when he signed the Emancipation Proclamation. A micro-hedge would represent a hedge against one of these investments. You aren't hedging the entire portfolio. Just a part.
Like...you dip into the option market and buy a put on the Historic Footwear Index, just in case the value of those Lincoln socks goes down.