Stock future positional trading ideas

[anilnegi]

Assuming you are long when the 315 bullish crossover happened, you should be in 80-90 points profit. You can hedge by buying some 590 puts (feb series) currently trading at 20 odd points and lock in 70 points profits for the rest of the month of Feb.

Cheers
SH

Sh
I always see people use hedging like this, but how to get benefit from this, suppose stock made low from current price than you will be in loss in future but your option value will be increased but if someone not locked profit at that time and stock again pile up on current level than your option will be in loss, so my basic point is to how to trade with your hedging.

 

[poolspan99]

Anil

You exactly put my dilemma in words.. Waiting for SH now..

 

[Tradewithhunter]

Sh
I always see people use hedging like this, but how to get benefit from this, suppose stock made low from current price than you will be in loss in future but your option value will be increased but if someone not locked profit at that time and stock again pile up on current level than your option will be in loss, so my basic point is to how to trade with your hedging.

Sorry I am confused at your question. Hedging is done to reduce the risk of loss or to lock in some profits on a position which is already in profit.

So if your future position is 90 points in profit (lets say you bought a stock at 300 and currently trading at 390) and you think from here it might start correcting so you need to hedge, it means you want to lock in profits even if market crashes. To lock in profits, you have to pay a price (like insurance premium) which is the cost of the put bought. If 390 put is trading at 20 and you buy it, you can sleep for the entire month knowing you have earned minimum 70 points even if the stock falls 50% next day. However if the stock price keeps going up ....lets say from 390 becomes 490 in next month ...your 70 points profit would become 170 points profit.

So by simply buying a put, you eliminate all chances of possible loss which is never possible if you just continue to hold naked future longs.

Cheers
SH

 

[Tradewithhunter]

Hi Hunter bro,

I wish to know your opinion about 315 for stocks (large mid caps) what so you think its a good thing to use 315 for delivery trades?

yes can be used...

Cheers
SH

 

[moneywise]

So if your future position is 90 points in profit (lets say you bought a stock at 300 and currently trading at 390) and you think from here it might start correcting so you need to hedge, it means you want to lock in profits even if market crashes. To lock in profits, you have to pay a price (like insurance premium) which is the cost of the put bought. If 390 put is trading at 20 and you buy it, you can sleep for the entire month knowing you have earned minimum 70 points even if the stock falls 50% next day. However if the stock price keeps going up ....lets say from 390 becomes 490 in next month ...your 70 points profit would become 170 points profit.

Cheers
SH

SH
Sir your are a genius! I really appreciate your strategy of locking profits at hand. In continuation of the above example I want to seek some more clarification.

On having bought 390 Put let us assume that the market reverses and the stock future comes down from 390 to all the way to 300 or lower, then obviously our gain from the future would have been erased but does that 390Put gain an equivalent of 70-80 points? Definitely the Put would become In The Money but my doubt is whether delta would give one point gain to it for every one point loss in the future price. So do we buy more puts than the number of futures we have, probably by reducing some more portion of that locked profit? What is your thumb rule?

 

[bigbullinside]

@moneywise
As I see it when we buy the 390 put it is 'At The Money' and thus the entire 20 point premium is a time premium. But as the 390 Put starts coming 'In The Money', as the stock goes down, its delta would come close to 1 as the stock declines further. So, figuratively, if the stock comes down to around 345-350 before the expiry, its premium should come up to around 40-45 of intrinsic value and if the market decides to give some time premium, then 45-50. But ideally, the the time premium in ITM Options reduces once the Strike Price is 5-7% 'In The Money' and the delta close to 1.
So to answer question, No. You don't need to buy extra puts to hedge your position, if you are planning to hold your position till expiry. If your outlook for the stock is positive and you are just buying a Put to insure against a 'what if' scenario then buying extra puts would just eat into your already accrued profits.
Cheers.

 

[Tradewithhunter]

All trades rolled over...

Nifty spot bought at 8273, now at 8797. Short term SL moves to close below 8750.

SAIL spot - Sold at 77.85, now at 75.35 Continue to be held.

Justdial spot - Bought at 1523, now at 1575. Continue to be held.

IDBI spot - Bought at 75.40, now at 72. Reversed to shorts.


Please note all trades are actually being taken in futures but prices being followed are spot.


Cheers
SH

 

[poolspan99]

SH

All the best for your above trades. There is no dearth of questions to be asked of you since you track in spot n trade in futures, how do you manage the premium part?

Also JustDial gave buy in 315 sometime back but you have entered so late? Any reasons? I assume you are not following 315 then.. But just excited to know anyother reason??

 

[Tradewithhunter]

SH

All the best for your above trades. There is no dearth of questions to be asked of you since you track in spot n trade in futures, how do you manage the premium part?

Also JustDial gave buy in 315 sometime back but you have entered so late? Any reasons? I assume you are not following 315 then.. But just excited to know anyother reason??

Happy to reply whenever I get time and find the question being asked is a valid one worth answering.

There is nothing you can do to manage the premium (or the discount), you just trade in futures at whatever price they are trading at based on the spot signals. Currently SAIL is trading at a discount and justdial, IDBI at premium, both of these factors work against my positions currently as I am short on SAIL and long on Justdial. Small price to pay if I want to trade positionally and use leverage as well provided by futures.

I dont use 315 for stock positional trading.

Cheers
SH

 

[poolspan99]

I wanted to avoid this question as much as i would.. But after 2 hours of reading it, it still worries me...

Why is SH not using the 315? Is there something that we all need to be cautious about??