Hedging Logic's

F&O
21

Respected Nithin Sir

Kindly throw some light on this ,

Nithin Sir i basically want to hedge my futures with ATM PUTS/ CALLS for three reasons

  1. Limit my Losses ( Not to lose my capital beyond a point )
  2. Use Margin benefits given by Sebi and Zerodha .( Reduced margins better returns )
  3. The Belief that since i hedged with atm calls and puts zerodha will not close my position what come may .

After your reply i get this feeling that hedging is of no use cause

  1. you might or might not hold on to my position
  2. profits from options are not taken into account
  3. margin benefits initially provided when trade was taken does not hold cause i will have to bring in
    additional margins .

kindly throw some light as to why in the first place have u reduced margins , cause i might need to bring in additional margins the next day even with ATM HEDGE and why should any trader
hedge with ATM puts /calls cause u might close my position .
Nithin sir bringing additional margin after taking into account my options profits is aggregable ( Incase you Don’t take into account my hedging profits it simply implies the hedge was useless).
And what totally confuses me is u might or might not hold to my position with ATM HEDGE IS TOTALLY CONFUSING . I hedged in the first place so that zerodha wont close the position .
sorry for such a lengthy message .
kindly share some light on this .

22

We charge what is required by exchange, nothing additional.

Because they don’t have m2m, as prescribed by exchanges.

After position is taken due to volatility span may go high.
Final point is we charge as required by exchanges and nothing on our own except on last 2 days of expiry for stock fno.

1 Like
23

dear siva sir

what about the first point which was totally confusing

you might or might not hold on to my positions ?

SO can u at least confirm me that you will hold on to my position provided i have hedge with ATM PUTS / CALLS against the future And of course provided i bring additional margin as required . ( Will i be provided time till END OF DAY or how much times is allowed to bring in additional required margins ) ?

cause once i get a margin call message or email i need at least some time to transfer funds to zerodha ( and of course as discussed there will be an ATM put/call in place ) . kindly clarify . thank in advance for your time .
highly appreciate your efforts to make us understand these things

24

If it is perfectly hedged then we don’t square off immediately but to carry position for next day you need to have full span+exposure and if not you maybe charged penalty.