How to do hedging in options
Hedging is used to limit your losses to an extent.
Suppose you have Short position in Nifty Call, as it is a naked short position the potential for losses here is unlimited, now if you buy an Option few strikes above your short strike your losses will be capped to an extent, doesn’t matter how much the underlying goes against you, this is how hedging works.
You can also hedge your Futures position with Options, if your are Long you can hedge by taking Long position in Put Option and if you are Short you can take Long position in Call Option.
Another benefit of hedging is, as it limits your losses, whenever you hedge your margin requirement come down drastically. You can read this post for more information.
Suggest you read the Options module on Varsity, you will learn a lot more there.
Why my hedging position doesn’t executed…why it got rejected.
Margin required is 48831… and I have available cash 93661
Also one hedging position is running
It showing check the order book for open orders
To get the hedging benefit, The buy order should get completed first. As per the above screenshot (#2), it looks like the buy order was either in pending status or canceled, hence the sell order got rejected.
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If buy order completed first then sell order will require full margin we will not get the margin benefit
First do what is told, then make your theories.
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Hi @Anurag_Toppo,
You will get the hedging benefit once your buy order gets completed,
Kindly go through the below link for more details.