I am posting Trading Strategy which I have applied in my trading.
In this strategy Nf future is hedged by options away nearly 200 points from Spot.
This strategy is best suitable in range bound & short term trending markets.
What one have to do is If taking a long suppose @ 5300 one should sold 5500 Ce with a premium of nealy 100 points.
After that hold this position uptill expiry or uptill 5500 which reaches first.
If market falls You will be safe uptill 5200 as U already have 100 points in your pocket.
If market further falls near to 5100 again average Nf long & short 1 more Ce of 5300 with a premium near to 60-75points.
Small trending or range bound market never falls or rises more than 200-250 points in a month or two.
If Nf reaches 5500 first squre off your CE @ market price.
Restart this method with new position.
What one will get nearly 200 points in Nf long &
Nearly 20-30 points Gain in Ce value decrease,or may Loss 20-30 points as Ce value increase.
Similar Strategy can be applied in down market by shorting Nf along with PE.
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