Best hedging strategy for nifty futures with options

Options Trading Without Predicting Market Direction


best hedging strategy for nifty futures with options

Options Trading Without Predicting Market Direction. 1) NIFTY can stay range bound and trade between and 2) Enter a slow bearish trend reaching, at expiration, the level. 3) Enter a strong bearish trend expiring well below the level. 4) Enter a slow bullish trend expiring at the level. Jan 10,  · I was searching for some hedging strategies for nifty future and I came to know a best strategy for it. "Hedge Nifty options with Future" This is the best strategy I have found till now. But it was posted before 7 years ago and then no updates from the admin after that. So, I . Bank Nifty Hedging Strategy. According to my knowledge and concern, First Adviser provides the best Bank Nifty Hedging Strategy in India. Their hedging strategy is amazing and it helps me a lot in bank nifty trading. Nifty futures open gap down next day and even below the stop-loss level.

Future & Option Hedging Strategy |

Please understand any strategy is the best if it is profitable. Unfortunately you will know if that trade was profitable only when you close it. Important: Whatever you trade you should strictly limit your losses. While trading limiting your losses should be given more importance than taking the profits.

One big loss can take away years of profits. To limit your losses you should do any one of the following: 1. Keep Stop Loss in your system: I said stop loss in your system not in your mind. You know if you put a frog in a tub of hot water, it will immediately jump out to save its life. But if you put it in a tub of cold water, and boil it slowly the frog will not jump out, and hurt himself. I do not know which broker you trade with, but I am sure every broker offers a stop loss in their system.

If you call and trade, you can ask the operator to keep a stop loss in the system as soon as you place the order to trade and it is complete. This way you will make sure best hedging strategy for nifty futures with options losses are limited.

Of course when time comes to take the profits you can cancel the stop loss order and book your profits. In some systems it is done automatically. Or you can hedge your position: I always prefer hedging over the stop loss. Because hedging will keep the trade alive while limiting the losses. In case the markets turn in your favor, you can still book profits. But if the stop loss is hit, you cannot do anything about it.

Yes, hedging involves extra transaction, but over a long period of time its more profitable than stop loss. Did you get what I am trying to say here? If you can limit your losses I assure you will become a better trader, best hedging strategy for nifty futures with options. NOTE: If you are willing to learn how to trade options profitably I offer a course to help you learn the best option strategies that are almost always profitable in any situation.

You will learn five great conservative strategies to trade options profitably month after month while limiting your losses. Contact me for more info. Depending on the condition of Nifty and of course your view, sometimes it is better to buy options, best hedging strategy for nifty futures with options, sometimes it is better to sell options.

But how do you decide what exactly to do — Buy or Sell? Here are some of the best option strategies to help you succeed: 1 When the volatility is low, you should buy options. Remember anything less than 15 is considered as less, and anything above 20 is considered high volatility. When the volatility is low, the options are priced low. You can buy and sell them when the volatility increases thus increasing the prices of the options.

Note: Since the last 1 year or so Mayvolatility is on the higher side. It went up to Buying options and selling them at a higher price is now getting very difficult. Selling naked options by the way is a simple way to suicide in your trading career. In other words please do not sell naked options. It is a very dangerous strategy. Note: Best hedging strategy for nifty futures with options problem with the two above written strategies is that it is very difficult best hedging strategy for nifty futures with options time volatility.

Today it might be 16 — and you may want to wait for sometime more so that it falls, but the next day it might be 20 and you may miss the bus. Some experienced traders however trade only volatility and win too. Recently Volatility trading was also introduced by Nifty in the Futures segment. But for average retail traders like you and me, it is very difficult to time the volatility.

So what do you do? Also note that no volatility can supersede Delta and Gamma if you view was right. A point swift upwards move in Nifty will increase the price of calls and decrease the price of puts even if volatility decreases or increases up to a certain level and enough time is left for expiry but again you should get your timing right.

You can buy ITM calls. Why ITM calls? Because ITM calls move fast with the underlying. If you buy out of the money calls, best hedging strategy for nifty futures with options, the underlying best hedging strategy for nifty futures with options to move significantly for you to gain some points, best hedging strategy for nifty futures with options. So your profits will be more. Yes the losses can be more too. But with OTM options you are more likely to lose even if your prediction of the movement was right.

Here is an important point to limit your losses. If your view is that a stock will go up points only then why you should play a move that you think may never happen? In that case you should sell the calls you have bought the calls. If Nifty expires belowthan you keep the premium paid to you as well as the profits you made on the calls. So what is the problem with this strategy? The problem is that if your view was right and you do not want to wait till expiry, the profit you make will be less than what you could have made had you bought a naked I not-hedged call.

Selling call will limit your profits beyond However if your view was wrong you will make a limited income on the calls you sold, and make losses in the calls you bought. Therefore your losses will also be limited. It depends on the loss you are willing to take. You should do this if you feel markets will move in a certain direction for sure. If you did not understand, selling the call is NOT unlimited loss as you have bought another call of This is a limited profit strategy as any profits above will be a loss for the call that you sold.

So your max profit will be capped till the stock reaches After that there is no point in staying in the market. You should close your position and take your profits even if the expiry is far away. Because you cannot predict what will happen during the expiry. The profitable trade today may be a loss making one when expiry arrives.

So do not wait till expiry. If you are thinking how will you make profit because one call will be in profit best hedging strategy for nifty futures with options another in a loss?

In the money options move faster than out of the money options. The difference is your profit. And if the market starts to go down, the call sold will start to generate profits; however your losses will be more in the call bought. The difference is your loss. Someone who bought a naked not-hedged call would in this case lose more money than you. However his profits also will be more.

BTW in any strategy you should clearly know your stop-losses and profits that you want to take. Therefore your strategy should be clear on when to take a profit and when to book a loss even before you put the trade. If you feel markets are not going to move much in either direction for the next few days — Iron condors are the best strategy during these times.

If the markets actually do not go anywhere and stays at around the same level you will make money. Iron condors are nothing but a combination of credit spreads of calls and puts. The call credit spread acts as a hedge best hedging strategy for nifty futures with options the put credit spreads. For example if you think the current series of Nifty will not go beyond and will not end belowyou can sell put and call.

However since this is a very risky strategy as you can suffer unlimited losses on either the call or the put if Nifty starts moving beyond those levels you will have to hedge your position. You can buy call and buy puts. This way you are insured even if Nifty goes anywhere above and below As you can see now you have done a call and a put credit spread.

But this strategy will limit your income and the risk-reward ratio is also not good. If you win 3 times and lose 1 time you will barely break even. If you continue doing this for a life time you achieve nothing.

Strangely this is the most popular way of trading by most traders all over the world. However this strategy can be very profitable over a long period of time. In short I can only say that you need to adjust if one of your positions gets threatened and have a strict stop loss, best hedging strategy for nifty futures with options. Condors works best when nifty is stable. If you think for the next few days nifty will be range bound, you can sell a condor.

Some people just sell condor and do nothing. These people are looking for less income but more chances of winning. For example if Nifty is atwhat about selling calls and puts.


Best Nifty Option Hedging


best hedging strategy for nifty futures with options


Dec 05,  · Here are a few reasons why I will always vouch for hedging: 7. Sometimes stop loss does not gets executed if the stock/nifty jumps. You are then left at the mercy of the market. Taking a market stop loss will kill you. You will feel miserable for months and will not gather the strength to trade . Finance Zacks The Best Hedging Strategy in the Presence of Transaction Costs by Hedging: At Home Furniture Henderson Nv Jul 9, - Nifty Options Strategy – Manage Options positions to get to always charts or examples contained in the nifty hedge option strategy lessons, are for informational We will be sending you the pdf file of the. This procedure is known as hedging the nifty future positions with the help of nifty options. With some stock brokers, hedging a position will lower your margin requirements. So you don’t block most of your margins on hedging and trade with the free Bhaveek Patel.