How to make Positional Hedging in Nifty options
There are many strategy in trading on google and youtube. But in live market it needs skill to apply them accurately. In live market emotion is our big enemy. It is very tough task to control our emotion in live market it requires a lot of practice. Only one thing save you from your emotion that is known as hedging.
Hedging can be done in several ways. There are various forms available on the subject hedging. Many trader says there is low profit in hedging but i know the profit is consistent. If you trade options naked, sometimes you win sometimes you lose but at the end of the month most probably you will be in net loss.
In example i will explain you simple hedging
suppose nifty cureent price is at 17159
then if you buy 17300 pe( put option)
then sell 17100 pe (put option)
it will become a hedge and your loss will be fixed. that is the difference between the prices of 17300 pe(i.e 134) and 17100 pe(i.e 81.5)
So risk will be 134-81.5=52.5 points
In nifty lot size is 75 so risk will be 75*52.5=3937 Rs.
Actually in hedge our emotion is under control as you dont have fear of big loss. In naked position emotion is our enemy in both the profit and loss.
If your position is in loss you will hold till zero and if you are in profit you will book soon.
In naked option buying time is also big enemy of trader so to cover time loss in our strategy we sell far otm so that we can gain our time loss from there.
In short it is best practice to always hedge your position so that you don't bear big loss.
you can also check my hedging video if need more clarityIf you have any confusion please feel free to comment
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