What is the best strategy for hedging the Future with an Option?


Please note that hedging Futures’ Risk with options depends on market situation, your risk taking capacity and the amount of your investment.

Generally, people believe if you

Long or Buy Futures it can be hedged with Long Put or Short Call


Short Futures or Sell Futures it can be hedged with Long Call or Short Put.

But you might not know…

Future Buy + Put Buy = Synthetic Call Buy

Future Buy + Call Sell = Synthetic Put Sell

Future Sell + Call Buy = Synthetic Put Buy

Future Sell + Put Sell = Synthetic Call Sell

This are called Formulas for Synthetic Derivatives.

That means you need to apply option strategies for hedging futures risk instead of buying or selling naked option.

There is a course from FinIdeas i.e. Smart Futures’ Trader. This course contain following most important topics for hedging future’s risk through Options.

  • Futures: Meaning, Terminology, Pricing and Settlement
  • Margin Calculation, Rewards & Risk in Futures Trading
  • How and when can we get stuck in Futures Trading? (Think but don’t take this question for granted)
  • Call – Put Options – Meaning, Payoff & Break Even Points
  • Formula for Synthetic Derivatives (Most Important topic for fund management & Risk Management)
  • Options Strategies – Bull & Bear Spreads & Ratio Spreads
  • Risk hedging concepts.
  • Hedging long Futures with necked Options trading & Options Strategies.
  • Hedging Short Futures with necked Options trading & Options Strategies.

This is an online course so you can learn at your convenience time and place. You can learn all this thing in only 8 -10 hours.

Remember: The Hedging is not only for controlling the risk but also managing funds. Happy Trading!!!

Visit FinIdeas for more details.

Print Friendly, PDF & Email