please explain more
, At what point it will be hedged for following case--
on 3/10/14, nifty was 7945, 8000 call shorted @100 , suppose on
22/10/14 , nifty trading at 8020 , as per option oracle on 22/10/14 , BEP for my short call is 8035 , Nifty goes beyond 8000 and I want to hedge my SOLD 8000 CALL by buying Nifty but at what level--
1) as soon as nifty crossing 8000 ,
2) as soon as nifty crossing 8035, or
3) as soon as nifty crossing 8100.
No Concrete Rule in this regard, It depends on individual psychology and market condition.
1) After selling 8000 call @100, your collected premium is ready to use as buffer money in critical market condition.
2) Close Position immediately at 70% profit.
3) No worry up-to Nifty 8100 Future level, but we should hedge beyond 8000 level (as per individual NF trading strategy, I use PA), because of --
a) Otherwise facing margin call by broker. (You may temporarily implement BEAR CALL STRATEGY in very volatile market condition by buying +200/+300 strike to reduce Margin Call and avoid next day Gap-Up opening, not necessarily).
b) Our main intention is to collect more income by FUTURE Trading.
(If SL hits at NF trading, our buffer money help us.)
4) If one has deep pocket & brave heart, no adjustment required up-to 8100 strike. (Caution :- In this point, we have no buffer money to play NF freely )
5) Near expiry, keep close monitoring on MAXIMUM PAIN point, (Recommendation :- Healthraj's Thread in this regard). I strongly believe that market tend to follow Max Pain Point (at-least nearest point). If Max Pain is <=8100 on 22/10/2014, no adjustment is required, though Nifty (NF/NS) is at 8035, but if Max Pain>=8100, immediately hedge by FUTURE as per your own trading strategy without second thought.
6) There is no any full-proof trading strategy, you have to make it own. After-all, trading is "10% Strategy + 30% Money Management + 60% psychology" -- Success comes from experience only, not from book...!!!
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