Options से Long-Term Wealth कैसे बनाएं ? Profitable Trading Strategy !
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- Опубликовано: 18 июн 2024
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0:00:00 - Preview
0:00:40 - Introduction
0:03:36 - Why Nifty Index?
0:09:59 - Reasons to buy options
0:15:26 - How to save tax?
0:19:09 - Live Examples
0:25:15 - Relax Strategy
0:27:38 - Basic Strategy
0:32:42 - Return Expectations
0:36:11 - Power Booster Strategy
0:41:04 - Risk Management & Capital Requirement
0:46:39 - New Value Addition to the Strategy
0:49:42 - Link between monthly and annual premium
0:56:03 - Investor's requirement
0:56:53 - Philosophy of the fund
1:01:55 - Conclusion
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Tnx sir
Long term option men kaise paise banayen jaldi se banaye video sir...kuch Sikh paun mai....aur fouj k noukri hoti nhi mujhse
Thank you, @Elearnmarkets, for giving Finideas the opportunity to share our vision on long-term wealth creation.
Thank you sir what about income tax on profit made by put
So slab will require changes
After income tax only final amount of nifty bees add hongi
👏👏👏👏 Congratulations 👏👏👏
Vivek sir you are my first mentor in market. Thank you so much.
Sir apke podcast bahut helpfull hote hai . Aap market ke champions ko hamare samane le kar aate hai jisse hum jese chhote traders ka bahut fayda hota hai. Sir i request ki aap shri Ravi r kumar sir ka interview karein. unka style of trading bilkul unique , simple and accurate hai. Hum to unka ek youtube session le kar he fan ho gye and unke session sikh kar trade liya or successful raha. Please unko invite karein. Yaha bahut se viewers ko unki techniques se bahut fayda hoga. Thank you ❤❤❤❤❤❤
Mere hisab se vivek sir ne hi sabse pehle you tube par REAL Trader introvise kiya hum aam admi ke liye iske pehle hum kisi trader ko jante hi nahi the so THANK YOU VIVEK SIR keep it up
Thank you for the kind words!
Wow, Opened a new Dimension within inside me.
& After listening that he's been doing it since 2014...makes me feel how less ik about the market. 🙏🇮🇳🙏
Great video sir ❤❤
Sir Learn to trade ka student hu apka Ek bat btani thi apko Apki series ko ek bar dekh kr sharukh khan bnne ki kosish ki or 10 jagh Logo ki videos dekh kr Maine 50 k se learning shuru ki thi Or 10k ka nuksan khaya ek mhine m yani 20% loss , Bad m Ab Learn to trade phir 5 bar dekhi Jo jo gltia ki mehsoos hua ki apne Apni har video m jo position szing risk management per trade smzaya vo ni smza lekin dhake khane ke bad loss khane ke bad akal ayi ki ye to sir ne smzaya tha kash mze ke lie na video dekh kr sikh ke bar bar bar practice krta to nuksan na khata ab 2 mhine se vhi 50k h jo ab profit m he end of the day close hote h thank u for the learn to trade sir ❤❤
Ab,dream,h ki apse milna h but 1 cr profit krke
Learnt something which is actually implementable in real life ! 👍👍
It's quite amazing video. Investment with peace of mind and return in long term much better than daily frustration by using option trading.
Thank you for your valuable comments.
Superb video with multi-asset management with Future with Hedging strategy.....Love you both for your mentorship, Vivek Bajaj & Govind Jhawar
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I am a learner and yet to get the experience in implementation and other finer details. But i want to say a big thank you to Vivek ji and Govind ji for taking the time to educate and providing such wonderful strategies... that too mind you is free of cost.. these strategies give so much hope .. thank you again..both are such gentlemen
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Valuable better content. Better efforts 🎉🎉
@vivekbajaj sir ap great h kitna apna time dete h🙏🏻 real hero h sir
For Individual stock you can calculate hedge ratio based on Beta of stock ,
Should we buy both 22000PE and 23000PE??
As in the downfall profit of ITM 23000PE profit will be setoff by loss in synthetic future...
So profit realised during downfall from 22000PE can be reinvested??
Please explain
bahut badiya.....bahut badiya.....bahut badiya......
Theoretically it is shown that it works best but I have few questions:
1. When market goes down it shows that there is no loss but actually 30% tax loss was not considered on the income from hedged put
2. How to encash hedged PUT to increase the investment quantity with below limitation:
a. If PUT becomes deep ITM due to crash like 2020, it will be highly illiquid to encash
b. If you can not encash then you don't get the gain of buying PUT
c. During bear market when you encash PUT then next hedge cost will be much more due to high VIX
3. We can not time the market so have to keep rolling over the PUT if market keeps going down, this can increase PUT cost due to increasing VIX at every roll over or pullback before correction so this can drastically increase the hedge cost
add on 30% taxes which ever you got profit from put side...he is just fooling people nothing else..i think covered call is much better option than this..
Well, one is going to lose in PE option some years, and gain some other years, if you have had a loss first you can carry that over to be adjusted against any F&O gains for next 8 years, so a good part of the PE gains will be balanced out with losses you will incur on PEs.
@@Meditrader Not really. If the total profit earned on Put in say 10 years is same as total cost paid (Loss) on put then, technically, there is no profit or no loss from Put in 10 years. which is not the case here. so this is not correct answer. Correct answer may be that he is declaring long term puts as hedging hence treated as long term investment hence may be declared as 10% capital gain instead of 30% tax. That is the only option I can think of.,.
That’s exactly is my point too … this guys never traded and making fool of folks !
You have raised some good points here. This will help people gain more clarity about the strategy. Let's explain them one by one:
1. When the market falls, puts will generate profits on the full 100% exposure, but this will be offset by the loss from 70% of the futures. Additionally, the premium paid for puts and the future forwarding cost will also be deducted, making it tax-friendly.
2. We generally shift the strikes before the put options become illiquid. However, if the put options do become illiquid, we can square them off with synthetic put options.
3. We should shift the puts, but we need to consider the cost-benefit of the shift. Regardless, at maturity, the puts will automatically be shifted.
Sir thanks for details explanation and video. One query, when to move to next month on synthetic future , lets say we bought synthetic future on 3rd May (for 30th May nifty strike price 22500 call buy and put sell) and we bought 22700 put also for hedging, then on 29th may we should roll over on 29th May or on 20th May or when? to next month June.
Good question. This will provide more clarification for others as well. The answer is as follows:
As we explained in the video, we will purchase the December month synthetic futures and hedging. Generally, next year's options also gain liquidity around November. Hence, we roll over the position in November. The second advantage is that we don't have to pay for the sharp decline in the options' time value during the last month.
Very good knowledge sir ❤❤ thanks for this
Many right questions in the comment which need to be answered. 1.The overall returns from 2014 are 10%. 2. The actual premium for put option and synthetic future premium total will be close to 8-10%. 3. Buying put and synthetic future is equivalent to buying call for December. 4. Put opion exit due to deep itm is questionable. 5. Tax will be more for put option recoveries. 6. Overall thing can be simplified by buying call and pledging mutual funds or debt funds.
buying long term DTE options is a complex calculation in itself, as options are priced based on futures pricing and IV (vix) . Also buying puts to hedge your portfolio seems to be good theoretical practice, but in reality you cannot compare buiyng puts to buying insurance. Your timing of when to buy that put and analyzing market structures is the harder part. You could combine this with other hedging strategies like call ratios, bear spreads. instead of showing random dec put pricing , why not just show actual portfolio calculations , since he seem to suggest to be using this for so many years.
EXCELLENT VIDEO. THIS IS THE BEST AND DETAILED VIDEO I HAVE EVER SEEN. THANKS A TON VIVEK JI !
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sir govind jhawar sir subject intricacy is phenomenal
बहुत बार ऐसा होता है जब लगता है कि भैया मेरा दिमाग तो एकदम जीरो लेवल का है। सेल्यूट ऐसा वीडियो बनाने के लिए।
Thank you for your valueable comment.
The annimation are too cool. Give a high five to the graphics guy in your team!
Interview was very interesting. Govind is sounding confident but i guess there are better ways to hedge ur portfolio. The thing which was told, is very basic and used to popular 10 yra back. Enjoyed the conversation😊
Waah !! Vivek Bhai & Govind Babu....Absolutely Absolutely Marvelous Content
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Thank you for your valuable comments.
Thanks Vivek ji for this broadcast.
Privious video atleast 10 times dekha very interesting.til so many questions but very jabardast
Please mention which brocker provide long term option to buy
Keep watching
Much love and respect for good work, thankyou
Much appreciated!
Banknifty future buy with 0.5 delta put buy. Doing same thing every month. Is it correct?
Quick question: For the long term path, do you suggest to invest on Jan 1 or around that using December Expiry to protect for that year and repeat every start of Jan?
You can do that even now because the yearly Option is slowly discounted as the time goes. Its more or less linear with the DTE. But I use even better version of this & doing this since last couple of years which makes double or even more % return. I developed it myself & right now 100% of my capital is invested in because the risk is Nil. I don't know why He did not explore that option.,.
The success in this strategy is more defined not by timing the market but by "Time in the market". As this is a long term strategy, starting investment on any day of the year works fine. The protection cost might be a bit proportionately high for that particular year but in a journey of 10 year this first year higher cost will have very low impact. But earlier you start your journey, the better result it can generate for you over the years.
Great! Thank you! A follow up question, Govindbhai’s method is that we use 70% of the capital to get an interest rate to fund the protective puts and 30% toward ETF/futures purchase. But over the years when the ETF size goes up , we will need more protective puts. But the 70% fund will remain the same and the interest rate we get from it will not change with time, correct? How is it sustainable in the long run?
You have raised a good question. The answer is that whenever the ETF grows, futures will also generate cash profits. This, in turn, will automatically enhance the debt portion.
@@finideasGovindbhai, could you illustrate that with a simple example?
@@JAG0PAG Lets say you invest Rs. 1 crore as follows. Now the product can be seen as follows as well:
1. 30 lacs in equity + 30 lacs protection
2. 70 lacs in Futures + 70 lacs protection + 70 lacs in Debt
Now lets say market moves from 10000 to 20000 , your exposure will be 2 crores & your hedging cost will be 20 lacs. Of this Rs. 5 lacs will be funded from interest generated in debt. Now question is how do you fund Rs. 15 lacs.
Ans. When market will reach 20000, your profit will be 1 crore of which 30 lacs profit will be added in equity (non -cash) and 70 lacs will be profit from futures (cash). This 70 lacs fund will be sufficient enough to fund your additional requirement of hedging cost and the remaining funds can be parked in debt.
@@JAG0PAG Lets say you invest Rs. 1 crore as follows. Now the product can be seen as follows as well:
1. 30 lacs in equity + 30 lacs protection
2. 70 lacs in Futures + 70 lacs protection + 70 lacs in Debt
Now lets say market moves from 10000 to 20000 , your exposure will be 2 crores & your hedging cost will be 20 lacs. Of this Rs. 5 lacs will be funded from interest generated in debt. Now question is how do you fund Rs. 15 lacs.
Ans. When market will reach 20000, your profit will be 1 crore of which 30 lacs profit will be added in equity (non -cash) and 70 lacs will be profit from futures (cash). This 70 lacs fund will be sufficient enough to fund your additional requirement of hedging cost and the remaining funds can be parked in debt.
EXCELLENT VIDEO. THIS IS THE BEST AND DETAILED VIDEO I HAVE EVER SEEN.
Thank you for your valuable comments.
Yearly synthetic future buy karenge to yearly call buy put sell hoga aur hedge ke liye Yearly put buy hoga. Aur future interest cost bachane ke liye debt funds me buy karege
I am an ETF investing person, after watching this video I got an idea to hedge
1st you said kali call lene me maja nahi hai. then you said we can make synthetic future by buying call and selling put. then you said buy put for protection.🙄 I am not expert in derivative. but if I sell put and then buy put for protection, isn't is like there is no put. only call buy from synthetic future left. so finally, we are just buying call! Please some one clarify
Thank you for the comment. You raised a good question. As we explained in the video at 52:45, the strike price for the synthetic futures will be different as it also includes the forwarding cost. On the other hand, we want hedging from the current level, so we will purchase ATM put options at the current level. Overall, the strike prices for the synthetic futures and the hedging puts will be different.
Synthtic future next strike price का बना लिया जाए तो शायद आपकी problem solve हो जाएगी
May be
Ans. There are 3 reasons for that
Tax prudence - Investing in equity & keep shifting the profits to ETF will tend to have lower tax than what you are suggesting
When the market goes up - You would want to lock your profits by shifting to higher strikes. ITM call will be difficult to trade as against an OTM Put (as in the case of of this strategy)
No opportunity to reduce cost by using Synthetic future - You can buy a September synthetic and December put, if September Synthetic is cheaper. Similarly, you can buy different strike synthetic if that is cheaper. So if you are using only call, you are leaving money on table to reduce the cost
Excellent session..Thank you both of you.
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Thank you sir. Keep going on Face 2 Face ❤
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very nice. thanks ..
Very nice. Congratulations to both of you. I have one question
You are saying that when market goes down that time you book profit in put and increase your investment by using this money. But the next put we have to buy for hedging will also be costlier and our cost of hedging will increase. So the gain in put is not actually gain. That will need more money.
Second point , please mention which month series future shall be bought for this strategy.
Thank you so much. Near far etc.
you will be buying ATM Next month expiry put . Then the price should be lower than your profit booked ITM put of current month expiry.
Dear @ravindraprakashhans ji
1. When market goes down say from 22000 to 10000 then your 22000 put will be worth 12000 and your 10000 put will be trading at around 500-700 depending on what time of year this happens. So you will have sufficient inflow to add equity at lower levels
2. As soon as you introduce synthetic future in investment, you see a lot many futures at various strikes & expiries. Depending on the which synthetic future is running at most logical cost, the synthetic future strike & expiry is purchased. It may vary from quarterly synthetic to December synthetic
Govind Jhawar ji has in depth knowledge about his domain! Awesome f2f vivek ji. Thank you!
Thank you for your valuable comments.
One of the best videos I have ever seen ❤
@@ashutoshvedak3575 Glad to know that you like this concept.
Sir mujhe thoda confusion ho raha hai ki put kharidana hai dec ka , lekin kis k against kharida ? Kya zawar sir ne future k against bola ya aur kuch hai,?
Vivekji y video dekha bahut achha tha journaly apk sare video dekhakar hi mene market sikha he
Lekin sir Jo hedge kar rahe he wo to bahut normal he
Ap monthly future kharid kar monthly itm put kharid lijiy aur every month rollover kariye isme hi Kam ho jaega
Thanks 🙏
You raised a good point. Let's explain it. There are a few reasons to choose long-term synthetic futures and put options over monthly expiries. First, monthly put options are comparatively costlier than annual put options. Monthly options have a cost of 2-3%, while annual options cost around 4-5%. Second, you can roll over the annual position to the next year before the last month, avoiding the sharp decline in time value during the final month. Third, using long-term options provides peace of mind by eliminating the headache of monthly rollovers. Lastly, choosing synthetic futures helps avoid daily cash settlements for mark-to-market (MTM) adjustments.
It is really nice strategy but hard to follow with discipline. A quick question on the time 39:37 can you compare your strategy returns vs the ideal Nifty returns. make sure in comparison you dont add money during fall (in ur strategy we added because we earned from Put). Assumption is I bought nifty today and will not sell or buy for next 20 yrs and would gift it to my child after 20 yrs. Since it is long term I will say leke bhool jao 😀. Show that comparison if possible. As a reply you can share the link with that excel calculation.
thanks , informative
Great video
Sir aap put kaha cover karoge nifty 12000 se gir raha hai 11000 10000 9000 aap kahi cover nahi kar paoge kyoki iski kya stratagy hai??
Lovely discussion. Very insightful
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- Future Premium or forwarding cost -7% per annum and Insurance (PE) cost -3% per annum so this strategy cost around -10%.
- Lets assume that we get 5% FD interest (post tax) on 90% capital so our cost to run this strategy is -5% per annum.
- This strategy will return only 7% equivalent to FD return if Nifty returns 12% per annum.
- I will buy the market on crash. In back testing for 10 years, this strategy reduces the return by 4% after doing all the hard work.
- Also, you may miss 13% dividend in 10 years which gives around 15% less return than buy and hold.
- This strategy has only one advantage that it makes your holding less volatile.
Please do share if I calculated it wrongly but I am keen to deploy this if this works.
back test for 15 or 20 years , buy nifty bees & pay only for put premium 12 month expiry , so buy 11.50 lac nifty bees and buy 23,000 pe 2x = 30,000 rs , for hedge 11.50 lac portfolio ,
Vivekji good video , without watching vix people trading option . loose money .Thank you.
All the best
If we have future long and put long and if market drops them effectively we loose money may be by fix amount. Then how to increase your portfolio by considering only put profit? Yes if we buy one more put seeing the crash possible then profit of one put can be used. One future long plus two puts makes it a bi-directional strategy.
Lets understand this with an example. Say you started with 1 crore investment as follows:
a. 30 lacs in Equity + 30 lacs protection in put
b. 70 lacs from future + 70 lacs protection from Put + 70 lacs parked in Debt
Market was at say 20000 and moved to 10000
a. Equity + Put -> In this part, working is simple -> the Puts will generate 15 lacs in free cash which can be deployed to purchase Equity
b. Future+Put+Debt -> Here your understanding is correct that Put will just offset the loss on future so practically no outflow in Future. Now, your "b" part will look like 0 + 70 Lacs in debt = 70 Lacs NLV -> This much exposure will again be taken in Future + Put
BUT NOW
The entry level of future will be 10000. So now if market moves back to 20000, your NLV goes to 1.4 cr (70Lacs on Debt + 70 lacs on future - cost of protection)
Not losing money on future when market goes down, is inherently a lot of profit for us when market recovers.
Hope your query is resolved. If you need more clarification, kindly visit bit.ly/iltsmgt-i
congratulations Sir
Extremely helpful f2f . Only 1 question that was asked by vivek sir that instead of index investment if someone wants to hedge stock portfolio then? In my case the portfolio beta is 0.8 then considering nifty beta as 1 ., how should I hedge by buying put option? I understand that my portfolio is less risky compared to nifty.... Please guide....
It is difficult to answer this question without actually knowing your portfolio because beta in itself has fallacies in itself.
When we say beta, we mean that if the market goes up it will rise at a speed of 80% of index and if the market goes down it will fall at a speed of 80% of index fall. If this is the case then generally it is a better idea to shift to Index itself as that way loose hedge errors can be easily avoided.
Loose hedge errors are events wherein hedging has been done by just matching beta and it has resulted in unhedged-like scenarios. For example you might find Reliance being correlated with index at say 1.2 now if you buy 1.2 times the quantity of Nifty puts then there may be cases when Reliance went up while index went down and you made money on both trades. The only problem is when Reliance dropped & market went up, the whole purpose of hedging goes for a toss.
@@finideas thanks.. That sounds practical.. Will certainly have brainstorming in this matter and find suitable option..
@finideas Sir, I have a higher risk taking capacity so can't i use this startefy and allocate funds 50-50 in Index and Debt?
what's your opinion on this.
We expect you to generate 8-9% indicative interest on the remaining funds and it's not advised to take higher risk on that investment. If you want to take leverage in risk-managed manner, you can opt for our AIF product where we take 2x leverage on your investment.
Couldn't understand one point when we will be buying future(both synthetic and non synthetic) in (relax and basic strategy) and if market falls, then:
1. The put will be in profit, we can roll it down to lock profits
2. But, whenever we will be rolling over the futures to next quarter or year. Now suppose if market recovers only to some extent, we will be effectively booking loss in futures, and new put hedge both. essentially wiping off the gains made in original put buy.
3. How far should we buy PE hedge ?
Anyone with clarity may please help.
Awesome video
Beautiful strategy. Thank you so much for sharing. Protection part is eye opener.
My pleasure!
Synthetic future means + call - put and if you buy put then put- put = zero that means only buy call . With ETF it makes sense but with synthetic future it is only buy call
Exactly but what happens is that the strategy ensures cash flow issue does not arise because, if market falls consistently for say 4 years or 4 months (in case of monthly options), then the money would go out of pocket till its gained back in 5th year. Hence only cash flow positive impact. But again, when he buys synthetic future instead of ETF, then tax will ideally be 30%. so, post tax returns are meagre.,.
bahut Achcha explain kar rahe ho aap THANS
In relax plan, the Future buy will give MTM losses during down-move and the insurance PUT will give same amount as gain, making it net zero. So the Units will not grow from the future part (70%). The units can grow only from the (30%) ETF part, as the losses are not booked in ETF, and the gains from PUT can be used to buy new ETF units. In case of Future (70%) part, the MTM losses will be equal to the PUT gain - so net zero. We just end-up paying more insurance as cost. Am i missing something?🤔
Dear Thanika,
Lets understand this with an example. Say you started with 1 crore investment as follows:
a. 30 lacs in Equity + 30 lacs protection in put
b. 70 lacs from future + 70 lacs protection from Put + 70 lacs parked in Debt
Market was at say 20000 and moved to 10000
a. Equity + Put -> In this part, working is simple -> the Puts will generate 15 lacs in free cash which can be deployed to purchase Equity
b. Future+Put+Debt -> Here your understanding is correct that Put will just offset the loss on future so practically no outflow in Future. Now, your "b" part will look like 0 + 70 Lacs in debt = 70 Lacs NLV -> This much exposure will again be taken in Future + Put
BUT NOW
The entry level of future will be 10000. So now if market moves back to 20000, your NLV goes to 1.4 cr (70Lacs on Debt + 70 lacs on future - cost of protection)
Not losing money on future when market goes down, is inherently a lot of profit for us when market recovers.
Hope your query is resolved. If you need more clarification, kindly visit bit.ly/iltsmgt-i
number of put is 100 and number of future is 70. that 30 extra put profit will be used to buy etf.
Then it is better to do only 30...
Not 100
@@sbsujeet in that case it will not cover future loss.
@@krishagartala09 Should not do any future, only etf with hedge
Synthetic future konse strike price aur konsi expiry ka karna he pls reply
Thanks to both maha guru 🙏🙏
Thank you for your valuable comments.
Thanks for your help valuable time knowledge for us again pranam 🙏🙏🙏
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Mey options mey trade nehi karta aur age karna bhi nehi hai ..😅
It seems kind of complications...aaj ka video dekar aur bhi dar lag geya.. sir mey toh audience ko bolunga stockedge❤❤ ka premium lelo breath dekho invest karo..mast raho
Making 18 % from long with hedge..
Is nirvana ....sir best of business makes 10% only ..
Best दहंदो !!! ❤
Thank you for your valuable comments.
Bhai 19% CAGR se juniorbees ETF grow Kiya h check it😂
@@shantanurathor37Bhai scalable nahi hai. Mere pass 5 crore rs ho toh me sare k juniorbees leke nahi beth sakta. Yaad rakhna juniorbees mein adani sahab hai
Can you explain how will you buy a nifty ETF at par, Nifty bees trade at substantial Premium to nifty spot whereas the put options you are highlighting here to arrive at your hedging cost are based in nifty current price. In practice nifty bees trade at more than 1000 points premium to nifty spot.
Dear Manishji
Your point is that Nifty bees trade at say around 240 when index trades around 22500, so how is it possible to buy Nifty ETF at par.
Ans. The question has arose because it is a general notion that Nifty BEES are 1/100th portion of Nifty which is not correct. The reason for difference in Nifty bees price & index is because Nifty bees actually holds the index constituents and keep on receiving various payouts including dividend. Now till the dividend is not distributed by Nifty bees that much NAV of Nifty bees is bound to rise and hence the price of Nifty BEES goes disproportionate as far as ratio of 1/100th is concerned. But if you match value then there is no concern ie if you want to purchase Rs. 30 lacs worth Nifty - buy NiftyBEES worth Rs. 30 lacs and your rise in NIFTY will be matched by NIFTY BEES.
Congratulations for 1 million subscribers
Excellent and practical presentation.
I have the following silly queries:
1. Which future is to be purchased? Near or far?
2. Why not follow the monthly future and hedge to buy in nifty also?
3. Which synthetic future to trade, near or far?
4. In case, partial investment say 30% is made in nifty20 and that becomes 1.5 times when renewal of insurance is due, what would be purchase value in futures?
Can we pledge existing MF portfolio and FD as collateral? Nice concept and very well explained.
Yes, you can pledge mutual funds for collateral if they're in demat format and allowed by your broker to pledge.
Very informative 🎉🎉🎉🎉
nice session.... high vix...calendar spread
Very interesting
I have few questions, could you please help me to understand
1. 70 % debt , can I use SGB Gold
2. Can we do same with MF like Index MF or small cap MF where I can buy these funds and hedge with Put, or MicapNifty put
1. We are parking in debt as we need to generate interest to fund our financing & hedging cost. If you are confident enough that SGB Gold will generate sufficient cash to fund the above, you can very well invest in SGBs.
2. You can think this in terms of buying a mercedes and protecting the same with insurance of Maruti 800. You have insurance but they may behave very differently wherein sometime small cap will rise & index will fall & you will have benefit on both trades. And sometimes, small cap will fall while index will rise & you will lose on both. In either case the purpose of hedging is defied. For short term trading, Beta based workings might work good but in long term investing this looks difficult to serve the purpose.
Thanks for sharing the strategy. However, I have a question
In the example provided by Mr. Govind , Put bought against the future will give protection against any downside risk. But to buy new additional units, we will have to infuse more capital. We cannot buy additional units from the profit made in the put as it will be used to offset the MTM loss on future. Given this, how will we buy additional units?
Hence, this strategy is just to protect from the downside risk but to generate wealth when market corrects significantly, we will have to infuse additional capital
You need to see strategy in two parts ->
Lets understand this with an example. Say you started with 1 crore investment as follows:
a. 30 lacs in Equity + 30 lacs protection in put
b. 70 lacs from future + 70 lacs protection from Put + 70 lacs parked in Debt
Market was at say 20000 and moved to 10000
a. Equity + Put -> In this part, working is simple -> the Puts will generate 15 lacs in free cash which can be deployed to purchase Equity
b. Future+Put+Debt -> Here your understanding is correct that Put will just offset the loss on future so practically no outflow in Future. Now, your "b" part will look like 0 + 70 Lacs in debt = 70 Lacs NLV -> This much exposure will again be taken in Future + Put
BUT NOW
The entry level of future will be 10000. So now if market moves back to 20000, your NLV goes to 1.4 cr (70Lacs on Debt + 70 lacs on future - cost of protection)
Not losing money on future when market goes down, is inherently a lot of profit for us when market recovers.
Hope your query is resolved. If you need more clarification, kindly fill in this form to connect bit.ly/iltsmgt-i
You can buy Nifty ETF(Niftybee) from the fraction of Money received..
super video. I am still thinking how couldn't i noticed this till now. this video cost in lakhs.
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One of the best videos of the series.
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Sir 50% cash component lagega future carry karne ko. What about that? Please explain.
Vivek bhaiya - pls send link which you were talking to go ahead with PMS Services with govind ji
Sir Ji, bahut hi acha content hai. Awesome
Thank you for your valuable comments.
Sir, how much PMS services charges for Finideas??
Very good insights, great learning, thank you.
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This is purely on index. For index i think hedging not required as it grows at a standard rate. For stocks
Instead of buying put, why can't we sell a put for a stock that is 10℅ lower. If itm can own delivery where we get the stock at discounted price. Once we own the stock sell call option. This gives more compounding than buying pe
Here we have 2 questions:
Q 1. If we do nothing we will any way make money out of index then why hedge?
Answer: It depends on what investors investment goals are. If he is targeting a return of 13-15% and is ready to bear 40-50% drop over 10 years (sometime back it was russia war, before that corona, before that US Housing bubble), then he can very well invest in index. But if he wants his fund to beat index by 2-3% with a downside risk of not more than 5-10% then the only option he is left with is to invest in index and protect the same on downside
Q 2. Instead of buying put, we can sell put below 10% and sell call once we buy the equity if it goes ITM
Answer: This can be a good strategy for people who has an excellent acumen in selecting which scrip will survive next 10 years. But if in case the selected scrip is like Rcom or Educomp then his principal might get into risk. Further again he has to evaluate how much risk reward he is comfortable with. If he is comfortable risking 100% of his capital (depending on selection of scrips) with limited upside gain (as selling call will limit his upside), he can very well select strategy as suggested.
Wich expiry i futucher buy and wich expiry i buy put
Can it be implemented to monthly stock also
Thank you. Good strategy for long term. I am already doing a different variant of this from last 2 years which increases the return by 1.5 times of what you said with 100% protection with the similar discipline.
but my question is that once we go via synthetic future, we end up paying 30% tax while ETF could have limited it to 10% so which variant is giving you better post tax returns ?
Or do you or your clients treat long term synthetic future & long term put bought as hedging against portfolio hence can be reported as LTCG ?? Kindly advice.,.
Dear Vidyasagrji A combination of both the things gives a better tax advantageous situation as well as better cash flow management. You can use a mix of strategy as suggested in the video
I am a huge fan of StockEdge/ Elearnmarkets. I had seen the last video of yours with Govind jee, have deployed some funds in Nifty yearly strategy Jan this year, and am sitting on some profit there. For the advanced strategy in Bank Nifty monthly options, if I create a synthetic future by buying a call option (CE) and selling a put option (PE), and then buy a put option (PE) as insurance, the sell PE and buy PE cancel each other out. This leaves me with only the call options for the month. As a result, this strategy effectively translates into buying call options and rolling them over each month. Am I missing something there?
i think you missed Mr.Jhawars explanation...if you keep buying call if market does not go up for few periods...you might end up losing the premium which will affect your returns
@@chukoovava Sir, I understand that part but you missed my query, please consider the scenario above of synthetic futures, where puts bought as insurance get cancelled out by the puts sold for synthetic future, and what remains is only calls. Please reflect on synthetic futures, and you will understand my query. Thanks for replying btw.
Goving sir youare too good man !
Thanks for this good video on interesting concept. I have one additional question.
With example of 1cr, returns on debt fund or any other investment to cover rollover cost is on 70 lakhs. As the return is consumed to pay for hedging and rollover, 70lakhs investment is not compounding. However, Index future will grow with time, due to this hedging cost and rollover cost keeps increasing (in percentage of strike price). Over the period of time, 70lakhs investment returns will be much smaller than the cost of hedging and rollover cost.
How you handle it in this strategy?
When market will grow, your index future will keep on generating cash. This cash will be sufficient enough to fund your protection and hedging cost on higher levels.
Further, the question is assuming that market will just keep on going up & there wont be any drop in market. If on a 10 years scale there are 2 dips of 30-40%, then your puts will have added enought NLV to your portfolio to fund any requirements of money for protection & rollover on later stage
@@finideas Thanks for the reply. So, 18% return mentioned in the video is post this expense (protection and rollover) consumed from the cash generated by strategy.
@@navneetgupta8942 Yes the CAGR is after considering all the expenses.
Easy way to get better return is Arbitrage to generate ~9% return in place of Investing 70% to Bonds. Example: Buy HFDC bank Shares equal to 1 lot and short HDFC bank Future. It generates ~9% Annually + dividend+ share(Pledge). HDFC bank shares can be pledged for buy synthetic Long and put.
Please guide me in the hedging point. If i long index by synthetic long then which strike price put option should i buy for hedging ?
If you buy today, buy 22000 call, sell 22000 put & then buy 23000 Put. but then both puts just get nullified but that is what is the strategy.,.
The hedging should ideally be of same level of market as we want protection from our investment levels. For synthetic selection look for most optimal synthetic ranging from current quarter to December quarter and strikes available.
Best strategy But not in live market coz No liquidity in future strike price, can you showing in live market as practical? Please reply......
In the year where market falls and Put gives you good profit, govt. will take 30% of that profit as tax from business income.
When market falls down, Puts will earn money on full 100% exposure but simultaneously it will get deduction of loss from 70% Futures. Further premium paid for Puts and Future forwarding cost will also be claimed as deduction. So it will automatically become tax friendly.
maza aa gya .. pahle wala bhi dekha tha ,, actually i am also in real state mkt , so this strategy looks very facinating ... thx ...
Thank you for your valuable comments.
Vivek sir,
When to book profit in put?
Please answer the million dollar question
Useful content. However, monthly Put hedging strategy does not provide profitable results due to time premium that the put options have in the beginning of the month. Please respond on this observation, preferably with back-testing results.
Sir synthetic future will be created using monthly option or long term?
Synthetic futures will be created on quarterly, half-yearly and yearly options. Monthly synthetic futures will not be created.
@govind jhawar :: u mean we continue to buy put of 23000 and 22000 ::50 , 50 and irrespective of market up or down and we never sell puts as it is a protection . keep on doing it every year .this is against say my investment of 50 lks as on today which i keep on shuffling .
Sir income from puts when market falls will be subject to tax.
Therefore I cannot reinvest the full amount received.
Please comment.
But the future or synthetic future will be in loss. By combining all together you will be on net loss. So no need to pay tax for that Year. Correct me if I am wrong..
why dont I put 100% in debt. I will get 7% interest. using that 5% interest I buy Dec call option. If market falls, only 5% premium loss. But if market rises, I get the profit. book profit and put in debt. And If market really falls, I have 100% money in debt, I can invest in the nifty till it recoveres.
govind sir is the best!!!
For last 8 years nifty has always given positive returns annually. If we have hedged it by taking put options every year , wont it have eroded our returns substantially for these years. Am I missing something here?
how can be 70Rs futures bought by collateral margin of 30Rs ETF??
When and how to book the profit on put (hedge) side is missing
Dear tushar, we need to first clarify the objective of investment as investment strategy changes as per the objective. If you are looking on puts as short term trading opportunity then you must definitely have a profit booking plan for the puts. But if you are looking to generate returns of equity with safety of FD then you need to hold protection till you are invested. Investing in this way will remove fear from investment thus allowing us to remain invested for long term.