HEDGING means protecting capital in sudden reversals of market.
For example,
If we bought Drreddy in dip@3000 but there is a risk of futher dip ahead.
So we can buy Drreddy future with put(3000strike price)
If we are buying 20/50shares in cash only,then small put with lower premium is enough(2500/2700strike price)
Hedging may be possible in many ways-
1.buy future +buy put
2.sell future + buy call
3.buy future dec+sell future January with small Stoploss both side
4.Buy most active call+put with small stoploss
5.Sell far out of money CALL+PUT with strict stop loss in 3rd/4thweek
Writing call & put has unlimited losses.If you buy call/put in rs100 premium,then it may reduce to zero.
If you sell call/put at rs100,then it may go to 400/600/1000 or anywhere. So unlimited losses are possible.
SYMBOL FOR INSTRUMENT TYPE (FUTURES & OPTIONS)
FUTIDX – index futures (nifty/bank nifty future)
OPTIDX- index options (nifty/bank nifty CALL/PUT)
OPTSTK- Stock options (acc to zeel CALL/PUT)
FUTSTK- stock futures (around 500+ futures available)
All stock & index options are not having regular volume.
There are 40-50stock options are having regular volume.
How can you recognize less volume options?
Option chain is blank in most part.
There is a big difference in ask & bid price.