Best strategy for positional trades (few weeks to several months as well)

F&O
1

I’m currently using NIFTY synthetic future for directional positional trades which may last for few weeks to several months, I pick farthest possible expiry series for this so that I need not enter fresh positional frequently and deal with max loss situation.

My problem is, if the trade goes in my favour from initiation, I’m fine, but if it starts to go against me, thats an issue coz despite the protective+margin hedges (NIFTY and FINNIFTY both), a 2-3% moves against me can cause big damage before i switch direction.

Need help ideas on how best to hedge such situations to minimize the loss when it goes against me.

2

Isn’t hedging, which you already mentioned, considered the best possible option available for this? Otherwise, wouldn’t F&O be considered risky at all, is it? :slightly_smiling_face:

1 Like
3

Thanks for your reply Sir.
Undoubtedly but query was HOW exactly to do it, there are too many moving parts when we talk about hedging. Simply buying other side option won’t help. Eg I’m going long on future for next few months in mind, I can’t hedge with puts of same expiry coz it’ll be too costly whereas puts of current expiry will go away too soon. So need some more tricks and smart ways to minimise the loss.

4

Taking strategies from random people in a forum is risky because it’s easy for anyone to suggest ideas, but you may end up losing money quickly. If that happens, whom are you going to blame? One suggestion I can offer is to prioritize reading. Over the years, I’ve learned that reading extensively and understanding different concepts gives rise to more ideas. There is no substitute for reading. Later implementing them through paper trades and penny stocks can be beneficial. It’s important to recognize that no two individuals are the same, and their investment plans, risk appetite, and approach towards the markets may vary.

5

Thanks again for your inputs.
All ideas welcome, I’ll assess at my own risk, postmortem will be blameless!
And yes, reading is ongoing.
Inviting ideas helps coz something what is obvious for others may be radical out of the box for me.

6

You are doing directional Trades, and yet you don’t want to book the loss when the trade is not favouring your view.

You have Stop loss for that.

1 Like
7

Thanks for your reply, but putting a SL is too generic/basic. Any advanced ideas like selling opp side hedged options awaiting favourable reversal

8

If you are buying calls out to several months then you could hedge that by buying month expiry far OTM puts which would only help if market suddenly changes direction and go down in elevator as they say.

And you can roll them after a week or two before the premium goes to zero. This kind of strategy will only work if market moves wild in any direction but if it just keeps on swinging then you will loose all the money both in calls as well as puts.

Also the quantity of how many PE against how many CE would depend on your time horizon as well as how much upside you are expecting and how much money you would like to put as hedge :slightly_smiling_face:

2 Likes
9

Thanks piyush, that’s more like it.