Hedging & Strategy Techniques

No. Hedging Condition Prediction Profit Loss

Technique
1. Covered Stock Stock buy + Put Buy Uptrend Goes up Goes down
(Minimized by put
buy)
2. Long Straddle ATM Call Buy + ATM Put Buy Any Direction Any Direction Stays in particular
range
3. Short Straddle ATM Call Sell + ATM Put Sell Neutral Stays in Any Direction
particular range
4. Long Strangle OTM Call Buy + OTM Put Any Direction Any Direction Stays in particular
Buy range
5. Short Strangle OTM Call Sell + OTM Put Sell Neutral Stays in Goes either
particular range Up or Down
6. Long Guts ITM Call Buy + ITM Put Buy Any Direction Any Direction Stays in particular
range
7. Short Guts ITM Call Sell + ITM Put Sell Neutral Stays in Goes either
particular range Up or Down
8. Bull Call Spread ATM Call Buy + OTM Call Uptrend Goes Up Goes down
Sell (Minimized by call
sell)
9. Bear Call Spread ATM Call Buy + ITM Call Sell Down trend Goes Down Goes Up
(Minimized by call
sell)
10. Bull Put Spread ATM Put Buy + ITM Put Sell Uptrend Goes Up Goes down
(Minimized by Put
sell)
11. Bear Put Spread ATM Put Buy + OTM Put Sell Down trend Goes Down Goes Up
(Minimized by Put
sell)
12. Call Ratio Spread 2 lots Call buy + Uptrend (Use Up: unlimited Stays in particular
1 lot Call sell (ITM>2 lots) during News profit range
based day) Down: limited
profit
13. Put Ratio Spread 2 lots Put buy + Down trend Up: limited Stays in particular
1 lot Put sell (ITM>2 lots) (Use during News profit range
based day) Down:
unlimited profit

14. Strap 2 lots Call Buy + Any Direction Any Direction Stays in particular
1 lot Put Buy range

15. Strip 1 lot Call Buy + Any Direction Any Direction Stays in particular
2 lots Put Buy range
16. Bull Call Ladder Bull Call Spread + OTM Call Hedging for Bull
Down or Up (till Rallied Upside
sell Call Spread particular
Breakeven)
17. Bear Put Ladder Bear Put Spread + OTM Put Hedging for Bear Up or Down (till Rallied Downside
sell Put Spread particular
Breakeven)
18. Bear Call Ladder Bear Call Ladder + OTM Call Hedging for Bear Unlimited Stays inside
Buy Call Spread profit if goes particular range
upside &
limited profit if
it goes
downside
19. Bull Put Ladder Bull Put Ladder + OTM Put Hedging for Bull Unlimited Stays inside
Buy Put Spread profit if goes particular range
downside &
limited profit if
it goes upside
20. Iron Butterfly ATM Call Buy + ATM Put Buy Any Direction Any Direction Stays in particular
Strategy + range
OTM Call Sell + OTM Put Sell
Call Butterfly 2 lots ATM Call Buy + Any Direction Any Direction Stays in particular
1 lot ITM Call Sell + range
1 lot OTM Call Sell
Put Butterfly 2 lots ATM Put Buy + Any Direction Any Direction Stays in particular
1 lot ITM Put Sell + range
1 lot OTM Put Sell
21. Condor (Deep OTM Put Sell + Stays in Stays in Goes beyond that
Outer OTM Put Buy) particular range particular range particular range
+
(Deep OTM Call Sell + OTM
Call Buy)
22. Calendar Call Buy Call (current Expiry) + Upside but can’t Any Direction Stays in particular
Spread Sell Call (same strike- take decision. range & if it rallied
(Intraday different expiry) Any direction too much/fallen too
Strategy until (within limited much
decision making) range)
Calendar Put Buy Put (current Expiry) + Any Direction Any Direction Stays in particular
Spread Sell Put (same strike- range
different expiry)
23. Reverse Calendar {Sell Call +Sell Put (current Stays in Stays in Rallied to anyone
Spread Expiry)} + {Buy Call + Buy particular range particular range direction
(Expiry strategy) Put (same strike-different
expiry)}
24. Diagonal Spread Non – Directional Strategy

Call Diagonal Buy Call (Last Expiry) + Sell Any direction Goes Up:
Spread Call (Current expiry) preferably Up Immediate
profit -------
Goes Down:
Late profit
 Put Diagonal Buy Put (last expiry) + Sell Any direction Goes Down:
Spread Put (current expiry) preferably Down Immediate
profit -------
Goes Up: Late
profit
25. Collar Stock Buy + Call Sell + Put Any direction Always Profit -------
(investment Buy
strategy) Condition: (CE premium >
PE premium)
26. Arbitrage Stock Buy + Future Sell Any Direction Always Profit -------

27. Arbitrage Box Call buy + Put Sell + Call Sell Any Direction Always Profit -------
+ Put Buy
Synthetic formula:
Stock Buy: CE buy + PE sell
Stock Sell: PE buy + CE Sell
Future Buy: CE buy + PE sell
Future Sell: CE Sell + PE Buy