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Define: Contract Neutral Hedging

Contract Neutral Hedging is hedging stocks with an equivalent number of put options or call options.

1 contract of options covers 100 shares of a stock. As such, contract neutral hedging using options can only be done in blocks of 100 shares. This means that you can hedge 200 shares with 2 contracts of put options but not 230 shares. Contract neutral hedging is a more beginner level type of hedging.

Read the full tutorial on Contract Neutral Hedging.