Comments on: Hedging with Futures

By: Saurabh

Saurabh — Mon, 03 Feb 2025 08:30:23 +0000

Sir Answer my few more question because I am confused.
1. If I not Exit the positions What will happen?
2. If market goes down & down even after the futures expiry, then what we have to do? Do we have to hedge again?
3. What I have to do to hedge the positions? I know I have to sell in the futures. But till what time?

By: Karthik Rangappa

Karthik Rangappa — Mon, 03 Feb 2025 04:51:28 +0000

In reply to Saurabh. This is possible, but its an unhedged position right? Not really hedged.

By: Saurabh

Saurabh — Sat, 01 Feb 2025 09:50:08 +0000

Sir I am bit confused with the statement that ‘hedging does not neither make profit nor loss’. Suppose in the above example when we short nifty position that contract have an expiry on which it will expire, and we have to take action before it expires so squaring off the position would make me profitable and what if just after few days the market started upward movement resulting my portfolio to move upward so, after few days/weeks/months my portfolio come at the levels they were before. Isn’t it going to be profitable?
Or even if the market going down for next few days/weeks/months, I would simply take another short position and before expiry I would square off that generating the profit so and so until the market moves in the upward direction. Which in net will generate me a profit.

I hope you get my question.

By: Karthik Rangappa

Karthik Rangappa — Thu, 03 Oct 2024 02:16:38 +0000

In reply to Roopam Rana.

Check this, Roopam – https://zerodha.com/z-connect/varsity/us-fed-rate-cut-how-it-affects-traders-and-investors

By: Roopam Rana

Roopam Rana — Wed, 02 Oct 2024 16:27:49 +0000

Sir can you also make a course on US fed rates and major global events that play role in volatility but are not easily understood by normal individuals. I usually find it difficult to grasp what fed rate cuts are usually talked about in the market and how to make a view on market with that info. And Thank you so much for your valuable lessons.

By: Karthik Rangappa

Karthik Rangappa — Sat, 28 Sep 2024 05:58:17 +0000

In reply to overcomewinner. You can exit the sell first so that you free up the margins.

By: overcomewinner

overcomewinner — Fri, 27 Sep 2024 17:42:44 +0000

which option i should exit first buy or sell in nifty option hedging trading ?

By: Karthik Rangappa

Karthik Rangappa — Thu, 26 Sep 2024 04:11:32 +0000

In reply to Prem. There is nothing like safe, Prem. It all depends on your risk appetite. But that said, bull spreads are hedged.

By: Prem

Prem — Wed, 25 Sep 2024 18:02:21 +0000

How to hedge with regards to Options? Is it safe to say the strategies like bull spreads are known as hedging?

By: Karthik Rangappa

Karthik Rangappa — Thu, 15 Aug 2024 07:03:58 +0000

In reply to varun. You can't equate the two. Knowledge is gained through experience, money is made by taking risks :)

By: varun

varun — Wed, 14 Aug 2024 16:56:48 +0000

Hello sir ..my ques is when will you become a billionare? because u r full of knowledge..and if u become one pls send me few bucks ..thanks

By: Karthik Rangappa

Karthik Rangappa — Sun, 26 May 2024 03:45:22 +0000

In reply to Aagam. Yes, the steps listed seems correct.

By: Aagam

Aagam — Sat, 25 May 2024 15:10:22 +0000

Please check if I am on a right track

To hedge a portfolio of stocks we need to follow the following steps
A) Calculate individual stock beta
Done.
B)Calculate individual weightage of each stock in the portfolio
=Current Value of particular stock investment / Total Portfolio Current Value
C)Estimate the weighted beta of each stock
=Beta*Answer(B)
D)Sum up the weighted beta to get the portfolio beta
Done
E)Multiply the portfolio beta with Portfolio value to get the hedge value
=Weighted Beta*Total Portfolio Current Value
F)Divide the hedge value by Nifty Contract Value to get the number of lots
Done
G)Short the required number of lots in the futures market
Done

Please check my question number B & E
As i have taken current value of all, While calculation instead of investment value.

Please confirm karthik. Am i on a right track?

By: Karthik Rangappa

Karthik Rangappa — Sat, 25 May 2024 04:50:58 +0000

In reply to Aagam. Thats right, you can take in the current market value.

By: Aagam

Aagam — Fri, 24 May 2024 15:41:57 +0000

Hi Karthik,

Thank you for sharing this great peice of knowledge,
I have a little doubt, when there is uncertainity,

If the portfolio is in positve MTM, Don’t you think the hedge should be on current value rather than invested value.

Please give your opinion and enlighten us.

Thanks
Aagam