General Guidlines for Option Hedging Strategy

Hello Friends Below is some General guidelines for Option Hedging Strategy,I hope U all will be able to understand each & every thing by this.
Hedging Strategy
Explanation 1: How to decide what option to sell and when?
Always sell option of next month. Ideal time to sell is first & 3rd week of contract month.
Sell Call of about 100-150 points below the current nifty level and Sell Put of about 100-150 points above the current nifty level.
Check-out the nearest support/resistance levels and decide the levels to go long or short. The difference between short and long level should not be more than 100 points.
Explanation 2: How this works and gives profit?
Let's discuss the current call given which gave 475 points by selling 4800 call and 5100 put
Nifty level was around 4970. Immediate support was 4950 and resistance 5000
During the next 2-3 weeks nifty either remain between 4950-5000, or go above 5000 or go below 4950 (any number of points) i.e. 3 probabilities are there, either nifty go down or go up or remain between 4950-5000. No other instance can happen. Let's discuss all the probabilities.
1. If nifty goes above 5000 - go long in nifty and hold till it comes below 5000. Because if nifty goes above, premium of call of 4800 will start increasing but we will get more points from Nifty Future and premium of 5100 Put will erode fastly and that will be our profit.
2. If nifty goes below 4950 - go short at 4950 and hold till it comes above 4950. Because if nifty goes below, premium of put of 5100 will start increasing but we will get more points from Nifty short and premium of 4800 call will erode fastly and that will be our profit.
3. If nifty comes or remains between 4950 - 5000 after 2 weeks the premium of both the put and call will erode. Premium of both will keep on eroding day-by-day if nifty remains at current levels. At the time of expiry if nifty closes below 5000 and above 4950, we will have to give premium of 300 points (difference between strike price of Put and Call sold) and even then, we will get profit of more than 180 points
Note : Read the call very carefully which means :

Go short in Nifty Future at 4950 and hold it for as many time or days as it remains below 4950. If it again comes at 4950, exit at this level. Under such situation, you won't gain even a single point in future, but you will get so many points in premium erosion.
Go long in Nifty Future at 5000 or 5040 level and hold it for as many time or days as it remains above 5000 (whatever is the entry point). If it again comes at 5000, exit at this level. Under such situation, you won't gain even a single point in future, but you will get so many points in premium erosion.
Future Points level

These levels are neither support nor resistance levels. These are the points 20-25 away from the nifty spot level at the time of making position.

Rules: -

1 Work better for offline trade account
2 Do not enter before 9:30 and after 14:50 but Can exit any time
3 If Nifty open above the long point position (in case of gap up) then take the position and square off the position at same level. (similar rule for short)
4 If there are many whipsaws, then brokerage can be covered with the trade of 2 lot of Nifty. And one lot can be squared off after gaining profit.
5 Don’t wait for the expiry, square off your all position when target is achieved.
(Example this time Target achieved in only 4 trading days)

Example (Gap up and gap down)

Question: -

1.How managing gap up/down in opening. As per current position, have to short below 4950 or buy above 5000 (let us say). What should we do if tomorrow it opens gap up at 5050? Should we enter at 5050? And also what should we do if it comes to 4950 same day.

Ans : -
Under such instances you have to generally enter at around 9:05 and 9:15 hours in the next trading day according to the movement. Let's suppose, if tomorrow Nifty opens at 5020 and at 9:05 and9:10, it reaches 5040. Go long at 5040 and hold till it comes down to 5040 either same day or in future. It means you have to short nifty at 4950 and Long at 5040 (instead of 5000). In such situation you won't having any position between 4950 and 5040. But if on some other day Nifty comes between 4950 and 5000, you again stick to earlier rule i.e. go long above 5000 and go short 4950.

Suppose, we go long at 5040 and nifty always remains above that level during next 2-3 weeks or suppose at 5180 at the end of 1st week of Feb our profit will be around 190 points otherwise, it should have been 230 points. Under such situation, our profit may be few points less, but we will never go in loss.

Otherwise, if you wish to cover these 40 points, go long with 2 lots of nifty fut. till you get 40 points or exit at 5040 level and see if levels reach 5000. There are so many ways to cover left out points.
Question: -

Once you enter short at say 4950, what is the SL? I mean if u enters at 4950 and it goes to just 4940 and reverses to 4950, will u exit? Or say 4949 is the low of the day, where will u put SL?

Ans : -
If the time is 3.00 - 3.30 pm, I don't trade and wait for next day and don't bother about gap up or down. If it's time between 9.00 and 2.50 pm, I wait for 3-5 points. For example if i short at 4950 and it goes at 4945, my SL will be 4950. if it goes more than 20 points below 4950, my SL will be 4947 (3 points brokerage). Some times I have to trade 2-3 times in a single day like this and some time only once in a month. You have to trade as many times as it comes that level or if you want to avoid trades; your SL should not be more than brokerage for sell/buy trades i.e. 3-4 points. It's up to your risk appetite whether you want to take chance or pay brokerage

Squrring off Nf Option Hedging Strategy

Sorry for late posting here I have squre off my Nf option heding strategy.
Profit calcualtion as under:-
A.Nf 4800Ce-Buy @125 (sold @ 275)+150
B.Nf 5100Pe-Buy @340 (sold @ 200)-140
C.Nf Future Short@ 4950-4760=190

Total profit A+B+C=200 Points.
Covered whole position in just 4 trading days wow its amazing

Nifty trdae for 29-jan-2010

Gm friends,
Profit calculation on my Nifty Option Heding strategy:

A.Nf 4800Ce-177 (sold @ 275)+98
B.Nf 5100Pe-278 (sold @ 200)-78
C.Nf Future Short@ 4950-4872=78

Total profit A+B+C=98 Points.
Target 200 points till 5-9 feb.

Nf trades for 29-1-10
Going long
Buy Nf @4760 Sl-4740 T-4820,4840
Short Nf @4850 Sl-4875 T-4820,4790,4760

Nifty Trdae for 28-Jan-2010

Hello Friends
Sorry for not posting yesterday due to electric problem at my native place.
Profit calculation on Option Hedging Strategy.
A.Nf 4800Ce-172 (sold @ 275)+103
B.Nf 5100Pe-312 (sold @ 200)-112
C.Nf Future Short@ 4950-4848=102

Total profit A+B+C=93 Points.
Target 200 points till 5-9 feb.

Nf trades for 28-01-10
As today is expiry so be very cautious.
Nf is in very over sold teritory a bounce up to 4950-4980 levels intra can be expected,but overall sentiment is still low so trade with strict Sl.
Going long
Buy Nf above 4920 sl 4905 T-4950-4980
Short Nf below 4880 sl 4905 T-4850-4840-4800.

Next month Strategy for Nf option will be disclosed soon.


Look at Nf 4700Pe &5100Ce for nxt month.
If Nf reaches near to 5000 buy 4700 Pe &hold it till 10 Feb.
Or Nf reaches near to 4600 Buy 5100 Ce & hold it till expiry.
Hope earn in both Options this month.

Trading Safe & Enjoy Profits.

Nifty trades for25-jan-2010

Gm friends
Sorry for late posting as some net problems.
Today I will disclose my option strategy .
Short Nf 4800 Ce @275 (Feb)
Short Nf 5100 PE @200 (Feb)
we get 475 points.
Now we will hedge these short positions with Nf futures
Every time when Nf goes above 5000 we wil long & evey time Nf falls below 4950 we will short in between 4950-5000 no action required.
After long if Nf agian comes down to 5000 levels we will have to square off our position similarly in short position If Nf comes above 4950 levels we have to cut our position.
We will try to get full 200 points with this strategy up till 5-9 feb.
I hope u all understand this heding strategy.

Nifty trades for 22-jan-10

Hello friends today busy in profit booking in my shorts.
buy NF @4950 Sl-4925 T-5000,5020
Short Nf 5010 Sl-5035 T-4975,4950,4900
Be cautious for Longs market may fall further if not today tomrrow or on monday keep sl & enjoy profits.

Nifty trade for 21-jan-10

Hello Friends I hope u all Enjoy my Yesterday Nf Buy & sell call
Nf sell call earn full 50 points.
Nf buy call earn 30 points.
I think these are good for intra tradings.

Nf trades for 21-jan-10

Short Nf @ 5220 sl-5237 T-5190-5170-5140
Buy Nf @5170 Sl-5155 T-5195-5205-5220

Today is the most remarkable day when in 2008 Nf fall almost 600 points in intra hope history not repeat itself.

Trade safe & keep sl

Nifty Trade for 20-jan-10

Gm friends,
After a long awaitining nf finally able to break 5240 levels, now lets see further downfall but Nf able to break 5180 levels decisively or not.
If not than we see another few days of range bound trade in between 5180-5240 levels.
Trade for today.
Short Nf @5245 sl-5265 T-5220,5200
Buy nf 5190 sl-5170 T-5210-5230.
Short term Stock recomendation.


Buy Geomatric software @76.5 SL-72.1 T-95
BUY Saber Organics Ltd.@72.25 SL:68.10 T-89.00


Sorry friends I cant reply to Your coments as I cant post any coment on any blog from my PC, If any body find any solution Plz mail me on my email musti1780@gmail.com

Nifty Trade for 19-jan-2010

Gm friends.
Sorry to not post Yesterday. As I am trying on a FULLPROOF Option strategy I am busy on that.
I will going to disclose a New Option strategy which will not fail in any chance means we all will going to earn at least 200 points in that.
This strategy includes Nifty Future also for hedging.
We have to hold options for near about 20 days.
Capital required for this Option strategy is near about 60000.
So friends get ready for this New strategy.


Nf trades for 19-01-10
Going long Buy over 5310 Sl-5290 T-5335,5350
Going short Sell near 5285 Sl-5306 T-5260,5240

From last few days I hope many of friends earn with my Nf calls also all my stock positional calls r rocking with near about 10% average return.
So keep enjoying profits.

Nifty trade for 15-jan-10

Gm all Friends, due to net problem posting late.

Today Nf may find suport at 5235 levels but if it breaks than we can see 5200 levels soon so plz look at 5235 levels.
Trade for today:-
Buy Nf @5250 sl5240 T-5275,5285
Sell Nf @5230 sl-5255 T-5210,5190.

Our stock positional calls are rocking now.
Rcom recomend to buy @180+ levels now 193
Punj recomend to buy @210 now 226
National fer.recomend to buy @68 now 72.
More calls will be updated soon.

Nifty trade for 14-jan-2010

Hello friends Sorry for not posting yesterday, as i was out.
after bottoming out Nifty today may again touch 5270-90 levels where one can initiate fresh shorts.But be cautious as Nf can break its previous high trade with strict Sl.
Going long :
Buy nf @5220 T1-5250 T2-5280
Sell nf @5285 T1-5260,5240,5200.

Nifty Trade For 12-jan-10

Friends Nf repeats its range bound tendency on monday just like Friday.
Today few big resulta like Infy,Wipro,Tcs are there which might turn market in any direction.
But chances of down side are more than upside,so to be short at higher levels is much safer than to be long at lower levels.
Watch 5230 on downside & 5290 on upside for a break out.
Going long
Buy Nf @ 5240 sl-5225 T-5265,5280
Going short
Sell Nf @ 5275 sl-5290 T-5250,5235

Nifty trade for 11-jan-10

Hello friends starting a new week in positive mood.
If any one buy Nf as per my friday call Book profit near to highest level of the day.
Trading calls for today:-
Buy Nf @5255 sl-5240 T-5280-95
Short Nf @5290 Sl-5310 T1-5275 T2- 5250.

Plz trade safe

Short term stock recomendations:
Buy rcom @185 T-200 (by prabhanshu)
Buy orchid chemical@185 T-192,197,205 Sl-181
Buy Dlf @373 T-385,390 sl-370 (All targets achived Book full profit)
Buy punjlloyd @210 T-240,260 sl-203 (hold for 20 days)
Buy andhra bank @110 T-114,117 sl-104
Buy suzlon @91 T-98,103 sl-86
Buy National fertilizer @70 T-90 sl-65
Buy Motherson Sumi @143 T-170 Sl-135.3

Nifty trades for 8-1-10

Buy Nf around 5245 sl 5230 T1-5275 T2-5290
Sell Nf around 5280-85 sl 5306 T1-5260 T2-5240
Be cautious for 2 levels 5240 & 5292
If Nf trade above sucesfully 5292 exit all shorts
If Nf trade below 5240 exit all longs.


Short term stock recomendations:
Buy rcom @185 T-200 (by prabhanshu)
Buy orchid chemical@185 T-192,197,205 Sl-181
Buy Dlf @373 T-385,390 sl-370
Buy punjlloyd @210 T-240,260 sl-203 9hold for 20 days)
Buy andhra bank @110 T-114,117 sl-104
Buy suzlon @91 T-98,103 sl-86

Nifty trades for 7-01-10

SELL NIFTY 5295 TARGET1

5275 TARGET2 5260 keep SL 5310


BUY NIFTY 5255 TARGET1

5280 TARGET2 5305 keep SL 5240

Option trade for this week.

Buy Nf 5000 PE @30 (trading at 34).
T- Nf downs to 5180
Sl- Nf spot closes above 5310.
Hold till any one of them not executed.

Nifty Trade For 4-01-10

Today The first trading day of year 2010 market may trade in positive but cant rise much due to global scenario.
Nf can trade positive in first half & than may fall to some extent but recover in end and can end flat.
Tarding range will be 5180-5240.
NF trades
Going long:-
Buy Nf 5175 T1-5200 T2-5220 T3-5250 Sl-5154
Going short :-
Sell Nf 5240 T1-5210 T2-5190 T3-5170 Sl-5255

Trading in New Year

Hello Friends,
We are starting a new Year with market on its highest level of past 20 months.
Yt should be the nxt a mild correction or more upside?
Can we breach 21000 sensex or 6200 Nifty this year is big question.
It might be possible If world markets & other factor favours but better chances are of a big sell off.
Markets may correct to some extent upto jan end or feb 1 week or might can move again forward after that,but overall sentiment may be of bearish mode.
So taking agresive shorts in Nifty at higher levels with proper sl would be a better strategy rather going long on Dips.

I will also post option strategy for short to medium term this weekend in which I have earn a good few points.
Hope U all also will gain with my strategy.