{"id":4465,"date":"2023-07-11T11:00:03","date_gmt":"2023-07-11T11:00:03","guid":{"rendered":"https:\/\/www.paytmmoney.com\/blog\/?p=4465"},"modified":"2023-07-11T11:00:03","modified_gmt":"2023-07-11T11:00:03","slug":"ready-to-hedge-explore-options","status":"publish","type":"post","link":"https:\/\/www.paytmmoney.com\/blog\/ready-to-hedge-explore-options\/","title":{"rendered":"Ready to Hedge? Explore Options!"},"content":{"rendered":"

In options trading, a hedge refers to a strategy used to reduce or manage the risk of adverse price movements in an underlying asset. The primary goal of hedging is to limit potential losses, although it may also cap potential gains.<\/span><\/p>\n

A common hedging strategy in options trading is to use a “protective put.” This involves buying a put option on the underlying asset. If the price of the underlying asset drops, the put option will increase in value, offsetting some or all of the losses on the underlying asset. Example: For say, you have 400 quantity Infosys stocks in the cash segment. After the result there is fear of stock going down so you can buy the Infy Put option as a protection to minimize the loss.<\/span><\/p>\n

How to hedge an options position?<\/b><\/h2>\n

Option Buy position:<\/b><\/h3>\n

For an example Nifty is trading at 18,000 and you are bullish on Nifty. You would like to buy Call Option to get the benefit if your view goes right. So you decided to buy an 18,000 call option. There is a chance that the Nifty will go down and you may lose money. To protect from the loss you can choose to hedge your position by Selling 18200 Call option. This strategy is called Bull Call Strategy. If the market goes down then you will lose money in the 18,000 buy Call position but you will make profit in the 18,200 sell call position.\u00a0<\/span><\/p>\n

How to execute Hedge position in Paytm Money?<\/b><\/h3>\n

To effectively execute this strategy you can use Basket Order in Paytm Money.<\/span><\/p>\n

Steps:<\/b><\/p>\n