Is It Safe Trading Nifty ?

#2
#3
The only safe method of trading is arbitrage trading - here you buy the underlying and sell the future at a premium then square off at expiry ; irrespective of the market movement you get to keep the premium minus brokerages.In case of nifty you can do this if you are in a position to buy the nifty scrips as a basket.

If you are not after 100% safety, then you can think of ways to limit the risk by having trailing stop loss where you have to take the risk of getting the stoploss triggered till the time the trade turns above breakeven.You can decide the position size from the stoploss and the absolute value of loss that you are comfortable with !
 
#4
just4trades said:
Will there be huge losses ?
Agreed that arbitrage is the safest way to trade. However, if you dont mind accepting a little more risk in an attempt to earn higher returns, Nifty futures are the way to go. Being a broad based index, the volatility is much lower than single stock futures, and is much less susceptible to manipulation than stocks. Also the correlation between an index futures portfolio and a stock portfolio could be low enough to provide excellent diversification benefits.
 
#5
I request to explain what is arbitrage trading as refered by kannamthanam. do one require to by the underlying same no of shares as a lot size? if the price goes up, when to exit or one has to wait till the future lapse? and when the price goes down, how profit come? i am new and this may be simple to others, but i can not make out.
 

sh50

Active Member
#6
This arbitrage thing has not be given its due. To my mind it can be used when u have idle cash lying around; for instance when on mkt being overbought you prematurely book profits and find the mkt trending further . If the futures price is higher than the cash price one has to buy share and sell futures. At settlement date-do vice versa and you have the return equal to the cost of carry from which you reduce brokerage. Example is given in Ashwani gujral's book on derivatives or maybe that NSE's book in which u give exam after paying 500bucks.
 
#7
Agreed that arbitrage is the safest way to trade. However, if you dont mind accepting a little more risk in an attempt to earn higher returns, Nifty futures are the way to go. Being a broad based index, the volatility is much lower than single stock futures, and is much less susceptible to manipulation than stocks. Also the correlation between an index futures portfolio and a stock portfolio could be low enough to provide excellent diversification benefits.
dear friend,

can you please explain to me what is nifty trading?

regards,

nick
 

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