How do you hedge a portfolio with Nifty futures?

Key takeaways from this chapter

1. Calculate individual stock beta.
2. Calculate individual weightage of each stock in the portfolio.
3. Estimate the weighted beta of each stock.
4. Sum up the weighted beta to get the portfolio beta.
5. Multiply the portfolio beta with Portfolio value to get the hedge value.

How Bank Nifty futures calculate profit?

Banknifty profit loss will be calculated like this: Banknifty future buys call 23600 to 23800 minted profit +200 points and its 1 point is equivalent to 40 rupees. So if banknifty buy position achieves the target of 23800 then the trader will earn profit 200 points * 40 quantity lot size = 8000 rupees per lot.

How do you hedge Nifty options?

You can hedge your current equity holdings by buying 5 Put Options with lot sizes of 200 shares each. You pay a premium of Rs 5 per share. You buy 5 Put Options with a lot size of 200 shares i.e. total 1000 shares. You pay a premium of Rs 5 per share i.e. Rs 5000.

How are Banknifty points calculated?

The Bank Nifty Index is computed using free-float adjusting market capitalization with base date of Jan 1, 2000 indexed to base value of 1000. The Index level directly reflects the value of all the stock of that Index. HDFC Bank Ltd. ICICI Bank Ltd.

How can I hedge my investments in Bank NIFTY?

You can hedge them through options. The best part about banknifty options is that they are available on weekly expiries so if you are taking really short term calls, you have an option to choose calls and puts depending on your trading position’s time horizon.

Why should I buy Nifty put options?

Suppose you are long on nifty future, but markets have picked short term correction. So here trader can buy same quantity of nifty put options as he is holding nifty future, here all the losses caused by the down move i.e. mark to market losses will be covered by those nifty put option.

How to keep open positions hedged?

Here the trick to keep the open positions hedged unless and until markets start to recover and in trader must select proper strike price depending on the days for F&O expiry. Point to remember is you are buying same nifty option quantities as you are holding nifty future.

Can I trade in NIFTY without calls or puts?

If u are a future trader u should not do it without calls or puts. Suppose u are short on bank Nifty use call options to hedge Ur risk. If u R long use put options. Amit Kr. Kodwani