How to Manage Risk in F&O Trading

Published : 29 May 2023

Hedging your portfolio 

After understanding the makeup of the portfolio, one can hedge it by purchasing Nifty Put or Bear Put Spread by using monthly contracts or long-dated options.

Creating short positions in Stocks Futures 

A trading short position should be more advantageous than going long during a weak market trend.

Gaining returns through Call-writing 

Call writing is the process by which the seller sells the call option to the buyer when the buyer has the right to purchase but not the obligation, it reduces the cost of holding positions and generates extra yield on an existing position.

Taking Long & Short trades

Pair trading offers an additional advantage in these market conditions because highly correlated pairs. Due to the market exposure of both stocks (long and short), risk in pair trading is relatively low.

Trading in Option strategy and Option Spreads 

To reduce risk, protective Puts and Calls must be used when selling or buying a future contract IT will help in the event of margin calls.