In Highly Volatile Stock Markets- Hedge Your Losses With Put Option

Subscribe to GoodReturns
For Quick Alerts
For Daily Alerts

    Though future and options as a sole are risky, but investors during the current correction phase with huge volatility in the stock market can protect their portfolio by hedging with a put option in the stock. The put option gives the buyer of the put to exercise the option at the decided price or strike price i.e. sell the security at an agreed price in the put contract at a future time. So, in a case when the stock market makes direction against your stand, you can exercise the put option to mimimise your losses.

    In Highly Volatile Stock Markets- Hedge Your Losses With Put Option

    Options contracts are not available for free and you need to pay a premium price for it as also brokerage plus there are tax implications.

    For the hedging advantage that you are provided with the put option you need to pay in the price. It is suggested that in highly volatile times you opt for a long term put option instead of the regular monthly options as they are expensive.

    Taxation on Option contracts

    For investors who take the options and futures route on an occasional basis, the income from such hedging is to be treated as capital gains income. While for other regular traders in F&O segment, the income is to be provided under the head business income.

    Story first published: Tuesday, November 14, 2017, 14:19 [IST]
    Company Search
    Enter the first few characters of the company's name or the NSE symbol or BSE code and click 'Go'

    Find IFSC

    We use cookies to ensure that we give you the best experience on our website. This includes cookies from third party social media websites and ad networks. Such third party cookies may track your use on Goodreturns sites for better rendering. Our partners use cookies to ensure we show you advertising that is relevant to you. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on Goodreturns website. However, you can change your cookie settings at any time. Learn more