The most common use of options for hedging large portfolios or large positions within a portfolio is to buy put options to protect from catastrophic price drops. This is analogous to buying insurance, in that you are paying a premium for the protection. The adverse event may not occur, but if it does, you can make some gains. Either way, you won’t receive the premium back unless you can sell the contract at a higher price than you paid for it. Any portfolio position can be hedged with option contracts, so long as you are willing to pay the contract prices.