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How Hedging Can Reduce Portfolio Risk

Hedging with futures may help reduce risk in a portfolio. Lower volatility can translate into lower risk.
October 28, 2026 • Beginner

How Hedging Can Reduce Portfolio Risk

Interested in trading futures?

Futures and futures options trading involves substantial risk and is not suitable for all investors. Please read the Risk Disclosure Statement for Futures and Options prior to trading futures products.

Futures accounts are not protected by the Securities Investor Protection Corporation (SIPC).

Read additional CFTC and NFA futures and forex public disclosures for Charles Schwab Futures and Forex LLC.

Futures and futures options trading services provided by Charles Schwab Futures and Forex LLC. Trading privileges subject to review and approval. Not all clients will qualify.

Charles Schwab Futures and Forex LLC is a CFTC-registered Futures Commission Merchant and NFA Forex Dealer Member.

Charles Schwab Futures and Forex LLC (NFA Member) and Charles Schwab & Co., Inc. (Member SIPC) are separate but affiliated companies and subsidiaries of The Charles Schwab Corporation.

Investing involves risk, including loss of principal, and for some products and strategies, loss of more than your initial investment.

Past performance is no guarantee of future results.

Hedging and protective strategies generally involve additional costs and do not assure a profit or guarantee against loss.

This material is intended for general informational and educational purposes only. This should not be considered an individualized recommendation or personalized investment advice. The securities, investment products and investment strategies mentioned are not suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decisions.

All expressions of opinion are subject to change without notice in reaction to shifting market, economic or political conditions. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

Any investments reflected are for illustrative purposes only. Individual situations will vary and are not the experience of any specific clients and are no guarantee of future performance or success. Not intended to be reflective of results you can expect to achieve.

The S&P 500® is a product of S&P Dow Jones Indices LLC or its affiliates ("SPDJI") and has been licensed for use by Charles Schwab & Co., Inc. Standard & Poor's® and S&P® are registered trademarks of Standard & Poor's Financial Services LLC ("S&P"); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"). Charles Schwab & Co., Inc. is not sponsored, endorsed, sold, or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s), nor do they have any liability for any errors, omissions, or interruptions of the S&P 500.

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