Need to see if this is a good idea

[vg1979]

There is a Nifty Futures 1 month contract and Nifty Futures 2 months contract, Mininifty futures 1 month contract and mininifty futures 2 months contract almost 4 identical products in a client terminal in any broker software for that matter.

Lets say I am taking a Nifty 1 month Futures position seeing how SGX Nifty fares, but I am seeing the trend going in reverse, then I hedge it by taking a 2 months contract in opposite position. (Buy in 1 month means sell in 2 months). Now I know the market is going in some direction and immediately I take a position of Mininifty in that direction. And have this open position last as long as possible while I gain out of mininifty alone. In case it is going the other way I can always hedge it or leave it for already i have one position in which I can book profit and since it is not going in one direction itself (Either bullish or bearish), I can book profit in rallies and wait for it to reach a favourable position to square off the other open position.

This minimizes all risks and can be done with ease I think. What do you all say?

 

[rajsingh]

God help you....

 

[vg1979]

okay an example

1) nifty was 4750, i take a position and it is going down. I hedge it by taking a 2 months sell contract.

If it goes in uptrend itself, then I profit out of it obviously...

2) Now after hedging there will be one side movement. So I take a position of mini nifty in that direction - if it goes against me I can always hedge it by taking a mini nifty opposite direction.

So in this case I have two opportunities to always gain. It reduces the risk of losing money in open positions without a hedge. Do you now understand what I mean?

This is better than trying to understand which direction the index or scrips will move.

 

[Placebo]

Your stock broker must be a lucky guy. He perhaps will not need to cold call anyone as long as you trade regularly.


Cheers

 

[vg1979]

market rallies will help right in this sort of a set up?

But right now it is down trend in nifty but still when it stops and corrects itself and start to rally the i could gain through this set up. And ofcourse if it is one trend i can always have a profit booked in mininifty.

Seems like a very unrisky thing to do. I just need some advice before plunging into it.

 

[veluri1967]

Theoretically, the market moves in only three directions, upwards, downwards and sideways.
Here, you are using 3 modes to trade. What if all the three modes fall into two different directions of the market when market takes the third move.
Let us say.....direction of the market U, D, S
Three modes of trade be X, Y, Z.
Now the market going U. You buy X.
Now the market going D. You sell Y.
Now the market going S. You sell or buy Z?
OK. Now market going U. You buy Z.
Now the market going D. Your position....X & Z is loss. D in profit.
ie X&Z loss is compensated by profit in D ie price to price. What about brokerages...friend.

 

[rajatheroyal]

You buy at one contract 1 and sell contract 2 and you say this is hedging. can you tell me what is the difference between you having this position and a person who doesnt have any position in market at that time?
except that you pay brokerage

 

[vg1979]

^^ good question.

Now to answer this question - when u take a position as a speculation there is a chance it goes the other way. So you hedge it if it takes the opposite direction in the two month future.

And now you are assured of knowing which direction it goes. So after some observation if the market keeps moving downwards, then short a mini nifty position, square it off when there is a substantial difference if it goes down by atleast 30 points or so.

Keep bookmarking this until you get profit. If it takes the opposite direction then atleast you know it is rallying to an extent. You have the option of temperorily hedging the mininifty and keep gaining in rallies. You keep the nifty one month and two month as a constant to see how the market goes. And since there are brokers that offer a flat Rs.50 per slot in Nifty futures, I am sure the brokerage wont be much either.

 

[rajsingh]

^^ good question.



And now you are assured of knowing which direction it goes. So after some observation if the market keeps moving downwards, then short a mini nifty position, square it off when there is a substantial difference if it goes down by atleast 30 points or so.

Why don't you just wait until you reach this stage.....

 

[rajatheroyal]

^^ good question.

So after some observation if the market keeps moving downwards, then short a mini nifty position, square it off when there is a substantial difference if it goes down by atleast 30 points or so.

After some observation if u can say that market is gonna go down then u can short nifty and suqare off all this even without having any position in market then whats the difference.
You are not trying to understand a simple basic thing.
i think you will understad after giving proper fees to market
good luck.