| Topic : Investment options In India |
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Activity:
9 views;
last activity : 07 29 2010 06:56:42 +0000
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Hedging
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Hedging is the main purpose to use derivatives. When there is a systematic or un-systematic risk about the price movement of the stock one can go for call or put option strategy accordingly. One can buy call option if he thinks that price of the stocks will go up in future in order to lock in the favourable price. On contrary one can buy put option if he thinks that price of the stock will go down in future in order to avoid losses. If he is not sure about the price movement then he can use straddle & strangle strategy where he will be having both call & put position & can use any one strategy according to the price movement. |
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Yes thats right. Also if one is already holding the shares and is expecting a hike in the share price but wants to lock the price one can buy put options.This is basically covered put.There is also synthetic call and put which can be bought when there is an arbitrage opportunity in the market.
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