Partial hedge
Definition · Level 9 · Risk & portfolio
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A hedge that offsets only part of an exposure, leaving some of it on. For a stock book: selling fewer futures than a full beta hedge, so a target beta remains.
Example
Beta 1.2 hedged to 0.4: two-thirds of the market exposure is hedged, one-third stays.
Where Tradecraft teaches it
Level 9 · Risk & portfolio, in the lesson “Beta hedges: full and partial”: Size a futures hedge to a target beta, and work out what risk a partial hedge leaves on.
Related terms
- Beta hedgeShorting index futures or an exchange-traded fund (ETF) tracking the index, with notional = portfolio value × β, to neutralize (estimated) market…
- Target betaThe market sensitivity you want after hedging.
- 1RThe dollar amount at risk on a trade (entry-to-stop distance × size), used as the unit for measuring every result.
- AlphaReturn earned above what the asset’s market exposure predicts: Rp − [Rf + β(Rm − Rf)].
- AnchoringFixating on an arbitrary reference price, such as your entry or a prior high, when judging what something is worth now.
- Annualizing volatilityTurning a daily volatility into a yearly one by multiplying by the square root of the number of trading days: σ annual = σ daily × √252 ≈ σ daily ×…