Inter-exchange hedge - II

INVESTMENT IDEAS

Equity-derivative hedge

Inter-exchange hedge

Titan Inds v/s Gold

Security

Margin

Instrument

Margin

Titan Inds fut short

83,000

MCX gold futures long

24,000

Write Titan OTM puts

75,000

Titan Inds futures short

83, 000

Total

1,58,000

Total

1,07,000

 More focused approach  Inter-exchange hedges cannot be initiated across the board on all equity shares. But any correlation between the commodities available for trade with listed companies which are impacted by the price swing in raw materials are a plum opportunity.  In the above table, the only choice a trader had in the pure equities segment was to hedge the scrip against itself or the Nifty. Hedging against itself meant a narrow outlook and hedging against the Nifty meant hedging against unrelated scrips due to the bouquet approach.  On the the other hand, price swings in Gold were used to hedge gold against Titan Inds which was the company directly impacted by the commodity swing. Needless to say, clear focus means higher profits and lower risks.  Now that we have seen the benefits from inter exchange hedges, we will get down to the actual opportunities that specific scrips vis-