Risk mitigiation through F&O

Discuss Risk mitigiation through F&O at the Futures within the Traderji.com - Discussion forum for Stocks Commodities & Forex; Hi Friends I am getting allocated 300 shares from Company X for a price say ...


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  #1  
Old 25th February 2008, 05:47 PM
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Join Date: Nov 2007
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nathan is on a distinguished road
Default Risk mitigiation through F&O



Hi Friends
I am getting allocated 300 shares from Company X for a price say 400 in ESOP after 3 months. I am happy to sell it for a price of 425. The current market price of the stock is 430.The 3months futures contract is at 435. I am not sure of the prices after 3 months.
How can I prevent my risk through Futures.

a) Should I buy a futures sell contract for a price of 435?

b) How can I use options to mitigate my risk

Could you kindly advise me please.

Thanks
Regds
Nathan

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  #2  
Old 16th March 2008, 04:22 PM
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Join Date: Apr 2005
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ivanboesky is on a distinguished road
Default Re: Risk mitigiation through F&O

Quote:
Originally Posted by nathan View Post

a) Should I buy a futures sell contract for a price of 435?
Yes, if you sell the futures at a price of 435, your profit is locked in. What you would have to do once you get the stock into your account is to sell the stock and buy back the futures (alternatively, you could sell the stock on the futures expiry date, and let the futures expire).

Quote:
Originally Posted by nathan View Post
b) How can I use options to mitigate my risk
You can buy the 425 put (or some other strike that is available). You would pay the premium upfront, but would have the potential of the upside not being capped.

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