If I have a long stock futures position(say @1150) along with protective puts(say 1120 PE), and I don’t have any free cash apart from that, and then afterwards there is a massive fall in the stock price(say upto 800). Will margin calls get triggered & long futures position get automatically squared off?
Follow up question if the answer to above is yes-- Say I am unaware of all this carnage and after the massive fall, things get back to normal & prices get back to higher levels. Then is it not utterly foolish to do hedging with puts coz, I will lose money on both long stock futures (which has been squared off automatically at lower levels) & the put option(which has not been squared off & which has also lost its value now after the bounce back in prices)?
Also is there any other stratergy to do hedging that does not have this loophole?