04. Hedging
L2 06 Hedging V3
Hedging with ETFs
Hedge funds use ETFs for hedging purposes. They may construct a portfolio that optimizes their exposure to certain stocks that they believe will perform well, and in order to cancel out general market movements, they may also short an ETF that contains a similar set of stocks. They may also short sector-specific ETFs if they wish to have a neutral exposure to those sectors.