Zero-Risk Strategies in F&O - Bigul
Options trading in the futures and options (F&O) market can feel like a rollercoaster—exciting but full of risks. What if you could smooth out the ride and minimise those risks? That’s where zero-risk strategies come in. While no strategy is completely risk-free in the real world, specific approaches can significantly reduce your exposure. In this article, we’ll explore what these strategies are, walk through a practical example, and discuss how to put them into action.
Also Read | 5 Effective Stock Options Strategies to Manage Risk
Understanding Zero-Risk Strategies
Zero-risk strategies aim to limit losses while still giving you a shot at profits. They often involve combining call options (the right to buy an asset) and put options (the right to sell an asset) in ways that offset potential downsides. For example, a covered call involves owning a stock and selling a call option against it. If the stock price rises, you might cap your gains, but the option premium you collect cushions the blow. If it falls, you still have the stock, though its value drops.
You can also execute the strategy by selling protective puts. At this point, you acquire a put option for a stock you own. Should the price fall, you may choose exercise the put and get out at the strike price, preventing your loss from growing. While these approaches aren’t always reliable, they do help traders become more secure when trading options.
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