How do i make profit from hedging? Suppose l bought one 5000 put @ 50 & at the same time l bought Nifty future(one lot) @ 5050,then what should be my strategy to make profit from them? Seniors,those doing trading in option ,please explain it.Regards...
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From : Ram Kumar at 12:18 AM  Nov 19, 2009 ( )
Dear Biswas
Try out this ....READ WHOLE ADVICE...
Buy two puts at Rs.50/ i.e 50*2 = 100 * 50 loss = 5000 maximum FOR strike 5000
You see the level of 4800 put at level of 5060 it still gives you Rs.11 which means
according to this you loss = 39*100 = 3900
But your nifty will be 260 points above like in case of 4800 put
which means 50*260= 10300 net profit will be 103003900= 6400
This all is theory my dear ...The risk in call put option is of time value..
Some times nifty just stays around 50005100 so no profit no loss..
but your put value will become zero so net loss..
MY DEAR WORD OF ADVICE.. HEDGING IS COMPLICATED IN OPTIONS..STAY AWAY FROM IT..
ALL THE BEST
i also want to know please if any one more clarify?
Thank you sir for your nice & simple explanation.
with the same investment you can sell a call and put at 20% above and below for assured profit of 10% and you need not trade for the whole month
which mean that you are limiting the risk to 100 points. your breakeven point will be 5100.after 5100 at expiry you will be making unlimited profit..and if it breaks below 4950 then your loss will be limited to only 100 points
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