Couple of ways I like to hedge. One, buy high quality, dividend paying stock. Then sell leaps (calls). For example, let's assume that J&J is selling for 50. I would buy 100 shares and sell 1 LEAP at 60. You're using the premium and the dividend as a hedge. You can also put on a collar: buy 100 sh, sell an OTM put, then sell an OTM call to help pay for it.