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SMART THINGS TO KNOW Hedging with futures

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Page 1: Smart things to know

SMART THINGS TO KNOW

Hedging with futures

Page 2: Smart things to know

Contd..1. Hedging is an investment strategy to protect against a negative event. A good

hedge reduces the impact of the event if it happens.2. If an investor needs money two months from now and fears a fall in equity

during this period, she can hedge this risk by selling equity index futures today.3. Assume that her portfolio's current value is `100 and she sells the index

futures at `100.4. On the future date, when she actually sells her equity portfolio, assume that

the value has fallen to `80 due to a market crash.5. She will lose `20 on her sale of equity, but gain `20 from her futures position.

The returns are to the desired value of `100. This value is protected irrespective of the market fluctuations.

Page 3: Smart things to know

For details and bookings contact:-

Parveen Kumar Chadha… THINK TANK

(Founder and C.E.O of Saxbee Consultants & Other-Mother

marketingandcommunicationconsultants.com)

Email :[email protected]

Mobile No. +91-9818308353

Address:-First Floor G-20(A), Kirti Nagar, New Delhi India Postal Code-110015