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    Hedge 17: by Mr. Nitish Kumar, NK Hedge School

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    Rakesh Kumar

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    Hedge 17: by Mr. Nitish Kumar, NK Hedge School

    Uploaded by

    Rakesh Kumar
    2K views7 pages

    Original Title

    Hedge 17 Notes

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    2K views7 pages

    Hedge 17: by Mr. Nitish Kumar, NK Hedge School

    Uploaded by

    Rakesh Kumar

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    Hedge 17

    By Mr. Nitish Kumar,


    NK Hedge School
    What is Hedge 17?
    ➢It is an option Sequence Design which uses the correlation
    between nifty and bank nifty.
    ➢We try to match the Nifty and bank nifty Behavior.
    ➢This correlation exists as there are many common stocks in nifty
    and bank nifty.
    ➢It is observed that when nifty goes up, bank nifty also goes up.
    ➢But sometimes Nifty halts but bank nifty keep going up.
    What is unique about Hedge 17?
    ➢We use the merit and demerit of both Monthly and weekly expiry of
    Index Option.
    ➢In Hedge 17 we are both option buyer and option seller.
    ➢In this you are both long and sort.
    ➢You are in monthly and also in weekly.
    ➢You are in Nifty and Bank Nifty both.
    ➢We are in all possible scenarios of Nifty and Bank Nifty Index Option.
    How to Execute Hedge 17 in live Market?
    ➢ Step 1:

    ➢ Buy 1 Lots of Monthly Expiry Nifty.

    ➢ If you are trading after 15th of a Month buy next month expiry of Nifty because as per option behavior premium will
    erode faster in last week.

    ➢ Here we are not worried about Strike price.

    ➢ We must buy an option in the range of Rupees 80-110.

    ➢ If you are buying this option between 1 st to 10th of a Month try to buy in the price range of Rs100-110 or upto Rs 115.
    How to Execute Hedge 17 in live Market?
    ➢ Step 2:

    ➢ Sell two lot of Bank Nifty 155-1700 points OTM that of weekly expiry.
    ➢ If you are selling on Friday or Monday sell current week or else next week.
    ➢ Make sure the price is not more than Rs 70-90 per share.
    ➢ If you don’t get the price range in then go to next week expiry to get the desired price.
    ➢ It is because we go to 1700 OTM in Bank Nifty this is called hedge 1700
    ➢ Sometimes when you buy bank nifty you may see a loss in your MTM position.
    ➢ In case the price doubles ( say from 90 rupees it goes to 180 rupees) during the intraday itself exit from one lot of Bank Nifty
    and continue with remaining positions.
    ➢ But in 80-85 percent cases the price does not have this tendency to double during Intraday session.
    ➢ Lets assume that present strike price of Bank nifty is 3000 and this goes upto 31700 ( only then you can make a loss if it
    crosses 1700 points)
    ➢ Sell the 2nd Lot of Bank Nifty and buy one lot of Call Option of Nifty @Rs 80-90
    What happens when Bank Nifty goes up by
    1700 Points ?
    ➢ Assume Bank Nifty goes up by 1700 points then Nifty will also go up by minimum 350-400
    points.
    ➢ This will make 90 Rupees call option 350-400 Rupees.
    Bank nifty will never give a loss until it crosses above our strike price of 1700
    On the expiry the Bank Nifty 90 rupees premium becomes 0 due to weekly expiry and we
    make the premium as profit.
    ➢ We will leave bank nifty as it is and we will keep selling bank Nifty after present expiry for
    the next expiry
    ➢ This trade is taken on the call side only.
    What happens when Market Goes Down?
    ➢ The value of Nifty may become from 90 rupees to 60 rupees but it that happens we will
    earn premium from Bank Nifty sales as it will become zero on expiry.

    ➢ When Nifty premium value reduces to Rs 30 exit this position and take the new position of
    100-115 rupees premium of next monthly expiry and

    ➢ keep selling Weekly expiry bank nifty.

    ➢ In positional trade with an investment of Rs 1.5-1.6 lakhs you can get a rerun upto 15-17%

    ➢ Hedge 17 does not get impacted with VIX Volatility.

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