Published : 29 May 2023
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.
A trading short position should be more advantageous than going long during a weak market trend.
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.
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.
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.