How to Hedge Nifty Future Positions with Nifty Options

Nifty future can be considered as long term investment by large group of nifty future trading community, only thing to keep in mind is rollover to next month when current month contract expires. Now for those long term nifty future traders, when market turns volatile and starts correcting these traders needs to hedge their open position. At such time nifty options come handy to these traders, it becomes insurance for underlying contract in this case nifty future. 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. This procedure is known as hedging the nifty future positions with the help of nifty options.
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.

Related Article:

1. Trading Nifty Options (Call Put) with Levels of Nifty Future Chart
2. Why in the Money Nifty Options Better to Trade in Expiry Week
3. Nifty options trading idea for next week, Buy more call options
4. Why Nifty options open interest data is important for trading nifty future

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