Dear Friends,
1. Lots of doubts have been raised. To start with, i have not yet decided whether to hedge or not.. as i am in the process of calculating where nifty may go to.
2. We are 6500/- minus and as i said that if we hedge, we shall remain 6500/- minus irrespective of where market goes. This is true, but we are definitely not planning to live with the hedge forever..
3. Let us assume, we calculate that nifty is likely to go to 3500, then it would not go straight down. At some point it will give a temporary bounce.. What we do is that when it bounces back, we exit long position and continue with the short position making gains.
4. On the other hand, let us assume nifty is going to 5000, again it shall not go straight, but shall make a dip, where we exit short position and carry on with the long position.
5. The hedge at present (if we decide wo take), is only to ensure no further loss of M to M margin in the very short term, till the trend of the market becomes clear.
6. Some members have given the example of calls having been purchased, can hardly be hedged. I agree. If you have purchased calls earlier, you would anyway lose out on account of time decay. So calls cannot be hedged. Options are good tools to be used to hedge on futures and cash segmnet positions. But if you have already taken position in a hedge mechanism, then to hedge a hedge mechanism is not easy. (i use the term not easy.. but it is not impossible). It is for this reason that i never take positions in call and put options, which i would not be able to hedge. I do use calls and puts to hedge in case i require to.
7. As i said earlier that investing in markets should not be speculative.. It is a science that few understand. Also discipline is most important. This does not mean that i am perfect.. Nobody is.. But i have learned Stop losses dont work if you wish to make money.
8. I request all to wait and see how i handle this market. You would see for yourself that i would come out with positive gains.. You may compare my performance with yours.. and see which is better.
9. In a volatile market, most decisions end up being wrong. So on Friday morning, when i knew we are in for a big fall, i sat it out without bothering over intra day volatality.
10. As i have said earlier, one should be prepared for the worst. So when i take positions in the market, i take care that even a 300 point fall on nifty in one day can be handled. Once the intraday volatality is over, i then recalculate and take action accordingly.
11. It is indeed all about timing the market, but timing the market does not mean we should trade every day and take every small movement as a cue to market direction.
Hope that explains.
With best wishes
Gaurav Kumar