• What is hedging? A strategy designed to reduce the risk of a significant loss. Think of it less like a bet and more like buying insurance for your portfolio.
• What is a protective put? A specific type of option that gives an investor the right to sell a stock they own at a pre-set price, effectively putting a floor on how much they can lose.
• The goal: The idea behind these strategies is to limit your downside risk on a stock you want to hold for the long term, giving you peace of mind through short-term volatility.

There’s a reason you picked the stocks you did. Maybe you believed in the company’s vision, or maybe their fundamentals shouted opportunity, or, maybe, you just liked the brand’s logo.

But now, the shadow of short-term news—like the return of tariffs—is threatening your long-term belief with the possibility of a temporary, painful drop.

You don’t want to sell. You don’t want to overreact. You do want to navigate the moment effectively (maybe even effectively enough to turn the bad news into upside).

That’s where hedging and protective puts come in, and this guide will help you use them.

Options work differently from outright buying or selling stocks and ETFs. That learning curve is why investors shy away from options strategies, either because they don’t have the time or because they don’t want to navigate the unique risks options come with.

So, let’s make it make sense. 

What are options? Options are contracts. They let you buy or sell a stock at a set price by a set date, no matter how much its actual value changes. Crucially: this contract doesn’t force you to sell. It just gives you the option to (hence the name). 

There are two basic types of options contracts you should know:

• A call option gives you the right to buy a stock at a specific price. Investors often use calls when they believe a stock's price is going to rise.
• A put option gives you the right to sell a stock at a specific price. Investors often use puts when they believe a stock's price is going to fall—or, as we'll explore here, to protect a stock they already own from a potential drop.

For the purpose of hedging, or buying insurance for your portfolio during this latest tariffs saga, we are going to focus exclusively on put options.

The situation: You own 100 shares of a company, ABC Inc., currently trading at $100 per share. ABC Inc., unfortunately, makes tech hardware and you know that’s a sector that has been sensitive to tariffs. Now, you’re concerned its value will tank as news unfolds before August 1 (when tariffs are slated to take effect). 

Step 1: Your protection. You buy one "put option" contract on ABC Inc. with a "strike price" of $95. This contract gives you the right to sell your 100 shares for $95 at any time in the next month, no matter how low the stock price goes.

Step 2: The cost of insurance. It will vary based on your institution. Many Canadian banks charge $1.25, plus a commission fee. But at Questrade, it’s just $0.99 per contract—and there’s no commissions

Scenario A: The stock falls. 

The tariff news is bad, and ABC Inc. drops to $80. 

Your put option is now incredibly valuable. While others are facing a $20 loss per share, your loss is capped. You can exercise your right to sell your shares at $95, protecting you from that extra $15 per share of downside.

Scenario B: The stock rises. 

The tariff news is positive, and ABC Inc. climbs to $120. 

Your put option is worthless (why sell at $95 when the market price is $120?), and it expires. You've "lost" the premium. But your 100 shares are now worth $2,000 more than when you started. The price you paid was like travel insurance: peace of mind throughout the entire trip.

Chef’s knives, screwdrivers, life jackets—pick your tool and they’ll all have one thing in common. If you don’t use them right, they won’t do what they’re meant to.

Hedging with options is the same way. 

Options hedging is a sophisticated strategy that involves risk, but for the prepared investor, they can offer a powerful way to protect your portfolio.

This checklist is designed to help you decide if you're ready to take the next step.

A new investor’s options readiness checklist

If you can confidently check these boxes, you are ready to move from theory to practice.

• I understand the goal. 

  I know this strategy is for protection (like insurance), not for generating profit.

• I understand the risk. 

  I am comfortable with the fact that the premium I pay for an option could be lost entirely if the stock price doesn't move in my favor.

• I have a clear plan. 

  I know which specific stock in my portfolio I would want to protect and why.

Remember, learning is a process. And a key part of learning options is just choosing to try.

There’s rarely been a more timely opportunity, either. The August 1 tariff deadline is fast approaching, and more will change before it arrives—for better or worse or somewhere in between.

That means right now, right here, wherever this article found you, is your chance to take your next step. Your chance to not let the market’s volatility dictate the future of your long-term investments. Your chance to protect your portfolio with powerful, low-cost options trades.

This defensive strategy is waiting for you.