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Future & Option Hedging Strategy |
jitesh7
White Belt
Joined: 24 Dec 2009
Posts: 24
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Post: #181  Posted: Sat Jan 23, 2010 2:41 am Post subject: |
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Hi All,
As per the request of some new visiters I tried to consolidate main - 2 points of Hedging (It may not cover all the points but still I guess this document will give basic understanding of this stretegy)
Hansraj: If you find something to add then please update it.
Thanks
Jitesh
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hansraj456
White Belt
Joined: 17 Nov 2009
Posts: 370
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| Post: #182 Posted: Sat Jan 23, 2010 6:10 am Post subject: |
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| kdd81 wrote: | hello
for d new strategy f dis month , today i lost almost 25 pts in d whipsaws ...wen nifty was abt to break d level of 4950 ..it went below dat 2 tyms .n i lost 9 pts in dat position ....n den wen it was trying to go above 5000 it made 5-7 attempts to go above dat ...dere i lost 16 pts in total for my ds position ..
my question to u is dat ...weneva nifty comes near to our levels for hedging ..it reverses back many a time ..so how do we take position to minimise d chances f our sl being getting hitted ...pls tell hw do u tackle it
thanks |
Hi
Your point is valid sir. So far I am concerned, I am not facing such situation because I am not doing it on my own and I do not have online account. I have given this job to broker and tell him the levels for going short and long. I am trading in multiple accounts of my family, friends and others and broker has deputed one expert person for my trades only and he trades only in my accounts.
Now come to your point, I have been discussing with various experts and taking views of members of this forum also for the list of problems at the time of hedging. During the last position, I have seen so many whipsaws which I never experienced even earlier. So give me some time I will come up with simple set of rules on how to trade for hedging, what should be SL and when to cover the lost points. For covering the lost points, we trade with double lots of nifty future for the time till lost points are recovered. But there's a problem of margin because there are few members who don't get margin on time, they can try with additional lot of mini-nifty.
Till the final decision from my side comes, please keep on trading with patience as only with the discipline and patience, we can earn from this plan.
Thanks
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hansraj456
White Belt
Joined: 17 Nov 2009
Posts: 370
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| Post: #183 Posted: Sat Jan 23, 2010 6:34 am Post subject: |
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| psrao wrote: | | Congrats Hans for achieveing the TGT, way to go! |
Thanks for your kind support sir,
I still remember your querry of 1st Jan 2010 for which the reply from my side is still due : Your querry was :
" Dear Hans,
Sorry again i am querying you.
If you see the above calucalation, u r making profit by NF and losing because of selling Options.
In all ur calucalation in excel sheet , u made profit in NF every month and lost in option in few months and gained in few months. You gained in option in few months only because u kept for them atleast a month (not two weeks).
If this is the case then y not consider trading only NF?.
If u want to use time decay to ur advantage and if ur stratergy is only to keep for 2 weeks, then i dont think u gain much by selling option in two weeks and that too far month as theta is less negetive compared to near month.
expecting ur views
regards,
psrao "
During our previous position made on 5th Jan. Nifty remained most of the time between 5250 and 5300. and till 21 Jan. we got 116 points of which 80 points were from deterioration of premium of far month option and not from Nifty. Had nifty remaing for 3-5 days more within these levels we would have got more points by premium erosion and not from nifty future. You u see the histroy of Nifty movement, this is for the first time nifty remained within its 1% range (5250-5300) for such a long period. This plan ofcourse takes advantage of nifty moves on either side, but the main point is to get profit, either from future side or option side. What's difference if points are given by future and/or option. This time options have contributed 40 points and 160 points from future for target achieved from last position.
regards
Hans Raj
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hansraj456
White Belt
Joined: 17 Nov 2009
Posts: 370
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| Post: #184 Posted: Sat Jan 23, 2010 6:37 am Post subject: |
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| jitesh7 wrote: | Hi All,
As per the request of some new visiters I tried to consolidate main - 2 points of Hedging (It may not cover all the points but still I guess this document will give basic understanding of this stretegy)
Hansraj: If you find something to add then please update it.
Thanks
Jitesh |
Thanks jitesh. We are now working on a plan on how a common trader can easily enter into hedging without losses due to whipsaws and will come up with that in next few days. When that part of the hedging is sorted out, we will update the entire set of rules and will update at this forum.
regards
Hans Raj
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hansraj456
White Belt
Joined: 17 Nov 2009
Posts: 370
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| Post: #185 Posted: Sat Jan 23, 2010 6:40 am Post subject: |
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| nilu_dpak wrote: | | joshiga wrote: | Hi Hans,
This seems to be nice strtegy.
But its difficult to find all the rules you have posted as reply to different user queries.
Could you please compile all your strategy rules, including things like how to handle gaps, in a single post. So, that new people can follow it easily.
thanks,
Girish |
YES that's true , one has to go thu so many pages,
i've tried by saving all the pages, but still finding all the queries unanswered, because u cant go thru all the pages in one go and the next time u lose track of the whole thing
i m trying 2 compile the whole thing i'll post it if im successful
thank u |
As I told, the rules are yet to be finalised, please do not update the half-baked instructions till the rules for hedging in nifty fut are finalised. Please hold for few days.
Thanks
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hansraj456
White Belt
Joined: 17 Nov 2009
Posts: 370
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| Post: #186 Posted: Sat Jan 23, 2010 6:48 am Post subject: |
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| bgsalvi wrote: | Hansrajji :
Thanks for your excellent strategy. I am also trading in fo segment for some time but max gain of 80-100 points or plain vanila strategy with lots of risk.
While going through your calculation it was noticed that the brokerage is very low even when there are three transactions? Are u availing any specific plans for brokarage charges, if U wont mind can you give more details.
Once again thanks for your excellent strategy. |
I have discussed the brokerage and margin issue with few of the members and have come to conclusion that generally Rs.75000 for one lot each of option selling and hedging with one lot of future is sufficient. My broker charges generally Rs.30/- per trade for 1 lot of options and Rs.70-80/- per trade of one lot of Nifty future.
Thanks
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psrao
White Belt
Joined: 02 Apr 2008
Posts: 11
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| Post: #187 Posted: Sat Jan 23, 2010 11:33 am Post subject: |
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| hansraj456 wrote: | Hi All.... Sorry I was out of town today and did not track the market. That's why I request my friend Mr. Vikas to post a message on my behalf to exit from hedging position. I have also exited from the hedging position by trading telephonically, because my broker keeps tracks of points. That's why I prefer offline account.
Let us now come to the point :
Final Profit calculation of hedging position at the time of exit today:
Premium of 5199 Call = 346
Premium of 5100 Put = 137
Total Premium = 483
Nifty Future Points gained = 5250 - 5077 = 173
Lost 10 points in today's whipsaw (for going long at 5200)
So Net Nifty Future Points gained = 163
Points gain at the time of selling both options = 523
Net gain in points 523 - 483 + 163 = 203 Points
Thanks for your kind support. |
Hans,
My point was, u r so good in getting the direction of NF right ki ur selling options for peanuts.
bcoz
ur using 75k total margin. instead of selling 2 option u can use them for NF.
See the present month itself where u r getting only 163 points from NF (which is less compared to what u got in previous months.
If u had sold 3NF with same 75k margin, u wud have got 163*3= 489 points. u r sacrificing 326 points for 40 (523-483) points.
In "my view" , this is not at all a hedging stratergy, as i explained in my previous post to Mr Harsh Kapoor. This strategy works depending upon how gud u r in getting the NF direction right. else not worth that margin for eating paltry premium and may end up loosing with both NF and options.
If ur not getting direction right , u will end up like sombody who told he lost 25 points and dont know how to recover.
regds
psrao
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aarya
White Belt
Joined: 12 Jan 2010
Posts: 4
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| Post: #188 Posted: Sat Jan 23, 2010 12:33 pm Post subject: |
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| hansraj456 wrote: | | jitesh7 wrote: | Hi All,
As per the request of some new visiters I tried to consolidate main - 2 points of Hedging (It may not cover all the points but still I guess this document will give basic understanding of this stretegy)
Hansraj: If you find something to add then please update it.
Thanks
Jitesh |
Thanks jitesh. We are now working on a plan on how a common trader can easily enter into hedging without losses due to whipsaws and will come up with that in next few days. When that part of the hedging is sorted out, we will update the entire set of rules and will update at this forum.
regards
Hans Raj |
Best wishes
Eagerly waiting for ur updation of rules & methods
thanks
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hansraj456
White Belt
Joined: 17 Nov 2009
Posts: 370
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| Post: #189 Posted: Sat Jan 23, 2010 1:30 pm Post subject: |
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| psrao wrote: |
Hans,
My point was, u r so good in getting the direction of NF right ki ur selling options for peanuts.
bcoz
ur using 75k total margin. instead of selling 2 option u can use them for NF.
See the present month itself where u r getting only 163 points from NF (which is less compared to what u got in previous months.
If u had sold 3NF with same 75k margin, u wud have got 163*3= 489 points. u r sacrificing 326 points for 40 (523-483) points.
In "my view" , this is not at all a hedging stratergy, as i explained in my previous post to Mr Harsh Kapoor. This strategy works depending upon how gud u r in getting the NF direction right. else not worth that margin for eating paltry premium and may end up loosing with both NF and options.
If ur not getting direction right , u will end up like sombody who told he lost 25 points and dont know how to recover.
regds
psrao |
No Mr. psrao, you are wrong. At the time of making position, I never know which direction nifty will move, either upward or downward. You said I am good in getting direction, Not At All. I am not a technical analyst nor an Astrologer who can tell which way nifty will move. Had I know I would have made position on 20th Jan and not on 5th Jan. It is the plan according to which we move in the direction where nifty moves. Even in the present plan, can anyone tell where nifty will move from 5000 levels? As per my opinion, no one in the World can tell for sure which direction the market will move. All the people make only assessment, but not a single person can tell with 100% surety about the market direction. I am not assessing the moves of the market but catching the moves of the market. Can you tell me which direction Nifty will move during next 2 weeks? No, you cannot.
It's an inbuilt system of covering the lost points. I think you need to study the entire plan again.
You said i would have got 163*3 = 489 points, but if nifty would not have fallen, then? Even then with hedging I was getting 116 points and would have got about 140 points by 28 Jan. but as per nifty, i would have got nothing but have lost lot of points i.e. three times what we may have lost. But in hedging we lost somany points but we covered that by trading in a planned and disciplined way. During the entire hedging plan I lost only 10 points. The main idea of this plan is that it is almost risk free. Either any of the options or future plays a significant role in giving profits.
For Nifty Future I am using another plan i.e. swing positional trading. That is also a part of my portfolio as is this hedging strategy. Both have their own role in the portfolio.
Thanks & regards
Hans raj
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hansraj456
White Belt
Joined: 17 Nov 2009
Posts: 370
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| Post: #190 Posted: Sat Jan 23, 2010 2:04 pm Post subject: |
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Hi
Profit calculation of 2nd hedging position of Jan.2010 :
Position taken on 22 January 2010
Sold Options of Feb.2010 Series and Hedging to be done by Nifty Future of January/February 2010 Series.
Premium of 4800 Call = 292
Premium of 5100 Put = 186
Total Premium = 478
Nifty Future Points gained = 5000 - 5019 = 19
Points gain at the time of selling both options = 472
Net gain in points 472 - 478 + 19 = 13 Points
Target : 200 Points by 5 - 9 February 2010.
Thanks
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psrao
White Belt
Joined: 02 Apr 2008
Posts: 11
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| Post: #191 Posted: Sat Jan 23, 2010 7:09 pm Post subject: |
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| hansraj456 wrote: |
You said i would have got 163*3 = 489 points, but if nifty would not have fallen, then? Even then with hedging I was getting 116 points and would have got about 140 points by 28 Jan. but as per nifty, i would have got nothing but have lost lot of points i.e. three times what we may have lost. But in hedging we lost somany points but we covered that by trading in a planned and disciplined way. During the entire hedging plan I lost only 10 points. The main idea of this plan is that it is almost risk free. Either any of the options or future plays a significant role in giving profits.
Hans raj |
There you go,
Even then u wud have got 36*3= 108 points , how far is that from 116 or even 140?
Agreed, u cud have got little less from NF if it remained in tight range upto 28th, but still see 489 points is more than ur 2 months target . This type of thinking helps u in long run.
What i mean by getting the direction right is, going with the flow , whenever it happens, may be on 21st or 5th itself. time is not imp, timing is (unlike investing).
As u only said u lost only 10 points with NF coz u played it in a planned and disciplined way, thats what i told "getting the direction right"
As u r consistantly making more than 100 points profit with NF for past 4-5 months, i suggest one thing
take out all the trades done by u, multiply all the points (profit or loss) made with NF with 3. Similarly do with options. Analyse it.
See the result urself, with that sort of returns and componding effect, u can be very rich soon.
rest left to u
rgds
psrao
Last edited by psrao on Sat Jan 23, 2010 7:31 pm; edited 2 times in total |
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hansraj456
White Belt
Joined: 17 Nov 2009
Posts: 370
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| Post: #192 Posted: Sat Jan 23, 2010 7:26 pm Post subject: |
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| psrao wrote: | | hansraj456 wrote: |
You said i would have got 163*3 = 489 points, but if nifty would not have fallen, then? Even then with hedging I was getting 116 points and would have got about 140 points by 28 Jan. but as per nifty, i would have got nothing but have lost lot of points i.e. three times what we may have lost. But in hedging we lost somany points but we covered that by trading in a planned and disciplined way. During the entire hedging plan I lost only 10 points. The main idea of this plan is that it is almost risk free. Either any of the options or future plays a significant role in giving profits.
Hans raj |
There you go,
Even then u wud have got 36*3= 108 points , how far is that from 116 or even 140?
Agreed, u cud have got little less from NF if it remained in tight range upto 28th, but still see 489 points is more than ur 2 months target . This type of thinking helps u in long run.
What i mean by getting the direction right is, going with the flow , whenever it happens, may be on 21st or 5th itself. time is not imp, timing is (unlike investing).
As u only said u lost only 10 points with NF coz u played it in a planned and disciplined way, thats what i told "getting the direction right".
As u r consistantly making more than 100 points profit with NF for past 4-5 months, i suggest one thing
take out all the trades done by u, multiply all the points (profit or loss) made with NF with 3. Similarly do with options. Analyse it.
See the result urself, with that sort of returns and componding effect, u can be very rich soon.
rest left to u
rgds
psrao |
My two months target is 800 points from hedging only and 489 are not more than 800 points. I am getting 200 points per fortnight not per month. And the most important part of this game is peace of mind. No tension. No sleepless nights. I have given my levels to the broker and I don't even track the markets for weeks together. Your plan may suit a person who is good technical analyst but not the common investor/trader who is a loser most of the time.
Thanks for your valuable suggestions.
regards
Hans raj
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kdd81
White Belt
Joined: 04 Jan 2010
Posts: 7
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| Post: #193 Posted: Sat Jan 23, 2010 7:46 pm Post subject: |
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| thank u sir for ur kind reply ...
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harshkapoor3
White Belt
Joined: 19 Feb 2009
Posts: 33
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| Post: #194 Posted: Sun Jan 24, 2010 2:13 pm Post subject: |
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Action for Nifty Fut = "Buy at 5190 and Sell at 5130"
Margin for selling options = 54000
Received premium = 27500
Net Investment = 26500
Sold Nifty at 5130
Margin for Nifty = 26000
Total Investment = 26500 + 26000 = 52500
Exited from above call yesterday i.e. 21.12.2009
Bought Both Options at 500 points (total for both)
Bought Nifty at 4980
Got 50 points in Options and 150 points in Nifty Fut
Total Points gained = 200
Total amount gained = 10000
Total trades done in Nifty Future = 4 times
Total brokerage for trading in Options and Future = 900
Net Profit = 10000 - 900 = 9100
Total Investment = 52500
Profit in Percentage = 17.3%
Dear Hansraj Sir and ofcourse Mr. PS rao
This is ur earliest of the mail, if u see, the points made in fut here is 150 and option is only 50, so if we take 3 fut position , instead of 1, then we will be making is suppose 3*150=450, which is far more than 200 points, so i also believe that this strategy works on fut position and not on optio , but in casee if nifth is not moving and is caught in a trading range then i think we will be making more points by options, so both the viiews are corrent given the way nifty is moving.
Pls comment
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hansraj456
White Belt
Joined: 17 Nov 2009
Posts: 370
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| Post: #195 Posted: Sun Jan 24, 2010 6:41 pm Post subject: |
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You are correct Harsh. It is very easy to say now when we know that nifty actually has moved to a particular direction. But no-one knew before 21 Jan. where nifty will move. So in the instance of uncertainty, it is very difficult to hold the nifty position overnight and have sleepless nights.
Even now we have again made a similar position by selling options. Can anyone suggest which way it will move in coming two weeks? I am sure no one can tell, can you? Will you buy or sell Nifty future 3 lots now and hold for 2 weeks not knowing where it will move? All the experts tell only a range which is so wide that profit making with that vision seems to be impossible with nifty future alone.
One more than let's assume we trade 3 lots of nifty at levels of buying and selling range as we have fixed for hedging, then 4-5 whipsaws will take away 3 times points and it will be a big dent on profit earning if nifty does not move or remains in a range of 100 points.
All the saying now that nifty future is giving more poinst. See the profits on 20th Jan. when only options were giving profits. The crux of the game is the safety, nifty may move either way or does not move, profit is to come. That's it. I know hundereds of normal traders who have lost their entire capital due to higher level of greed. So far as I am concerned, I am satisfied with 20-30% profits per month from this strategy because I don't remain tense or have sleepless nights. Peace of mind is the most important aspect for me.
I don't at all say that psrao or you are wrong in suggesting this. But my view is totally different, and I have been trading in nifty future as well as stocks also. These segments have their own role in a balanced portfolio. Hedging strategy is also a part of my portfolio and it is a bread-earner segment because it gives me assured income per month, which nifty future and even stocks cannot guarantee.
Thanks for your kind support.
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