Investors use hedging strategies primarily to:

Investors utilize hedging strategies mainly to minimize the risk of loss associated with their investments. Hedging involves taking positions that offset potential losses in an existing investment, thereby providing a form of insurance against adverse price movements. For example, if an investor holds a stock that they fear may decrease in value, they might purchase a put option on that stock. This option allows them to sell the stock at a predetermined price, effectively limiting their downside risk.

While other options like maximizing long-term gains or increasing liquidity might be strategic goals for some investors, hedging is distinctly focused on risk management. Hedging does not inherently aim to enhance asset liquidity or maintain control over public companies; rather, it specifically is a tactical approach to safeguarding against potential financial losses in volatile markets.