In a hedging strategy where you are selling a stock and buying calls, is it preferable to buy futures instead of calls since in futures one can put a stop loss.
I understand that in calls one has to pay premium. How does it compare with the margin to be paid on futures.
In a hedging strategy where you are selling a stock and buying calls, is it preferable to buy futures instead of calls since in futures one can put a stop loss.
I understand that in calls one has to pay premium. How does it compare with the margin to be paid on futures.
The premiums that you pay in buying put or call options is actually the maximum loss that you can suffer in case the trade goes against you. In effect it behaves like a stoploss too! Also there are no margins to be paid when you buy put or call options.
Thanks for clarifying. What I wanted to know is that are futures more costly(margins) or options(premiums) more costly. I know that premiums would depend upon the strike price and that varies but can you give a gross approximation or is it like comparing apples and oranges.
Thanks for clarifying. What I wanted to know is that are futures more costly(margins) or options(premiums) more costly. I know that premiums would depend upon the strike price and that varies but can you give a gross approximation or is it like comparing apples and oranges.