How Investors Can Hedge Their Portfolios Using Options

Agar aapko options mein paisa kamaana hai toh yeh poora game skill aur math ka hai.

Agar aap investor ho, toh aapko Black Swan events ko hedge karna chahiye.
Aur agar aap trader ho, toh us mahine ka jo bhi aapko support level lagta hai—jiske neeche aapko lagta hai breakdown ho gaya toh dikkat ho sakti hai—us support level ko hedge karo.

Yeh ek aisi secret strategy hai jo even kai experts ko bhi nahi pata hoti.
Bahut saare experts bhi yeh nahi jaante ki aisa kuch kiya ja sakta hai.

Toh jo pehla optimization hai, woh yeh hai ki aapko hedging long-dated options ke through karni chahiye.

Options mein multiple factors hote hain jo change ho sakte hain.
Toh ho sakta hai ki bazaar upar gaya ho, fir bhi aapki strategy ne paisa nahi banaya.

Lekin agar aisa hua hai, toh definitely galti aapki strategy mein thi —
kyunki uss cheez ko aap seekh kar aur skill ke through fix kar sakte the.

Vivek: Hello everyone! Welcome to another episode of Bazaar & Beyond — jahan hum deep dive karte hain finance, investing aur market ke duniya mein, taaki aap apne investment decisions aur bhi smart bana sakein.

Main hoon aapka host, Vivek Anand.

Aur yeh episode thoda special hai, kyunki hum pehli baar apne guest se online jud rahe hain.

Aaj ka topic ek aise concept par hai jiske baare mein logon ne suna toh bahut hai — lekin shayad samjha kam hai: Options.

Most log options ko speculative ya risky samajhte hain. Lekin aaj hum ek different perspective se baat karenge — how retail investors can use options to hedge their portfolios.

Matlab aapke investments ke liye ek safety net kaise banaya jaye, taaki agar market gire bhi toh aapka portfolio completely exposed na ho.

Aur iss conversation ko guide karne ke liye humare saath hain ek expert jinhone options trading ko simplify karna apna mission bana liya hai — Shubham Agarwal, Founder & CEO of Quantsapp.

Shubham: humein Canada se join kar rahe hain. He has worked in quantitative research roles for over a decade at major Indian brokerages like Motilal Oswal, JM Financial, and HDFC Securities.

Vivek: Thank you so much Shubham for joining us!

Shubham: Thank you Vivek for having me on your show, and thank you to m.Stock as well. I’m really looking forward to a great conversation today!

Vivek: Chalo sabse basic question se shuru karte hain, Shubham. Jab aap bolte ho "portfolio hedge karna hai", toh uska matlab kya hota hai? Regular retail investors ke liye — jo hamare viewers hain — aap please is concept ko ek basic tarike se samjha dijiye.

Shubham: Bilkul Vivek. Jab hum kehte hain ki portfolio ko hedge karna hai, iska simple matlab hai apne investments ke against ek safety net banana. Aisa mechanism use karna jisse agar market girta hai, toh aapke portfolio pe impact kam ho ya na ho. Jaise insurance hota hai — waise hi hedge karna ek tarah ka investment insurance hai.

Vivek: Toh yeh hedge karne ka process kya hota hai practically? Kya koi simple example de sakte hain?

Shubham: Haan bilkul. Maan lijiye aapke paas ₹10 lakh ka equity portfolio hai. Aap chahte ho ki agar market 10–15% gir jaye, toh aapke returns ya capital secure rahe. Toh aap kuch aise options buy karte ho — jaise put options — jo market ke girne par aapko profit de sakte hain. Yeh profit aapke losses ko balance karta hai.

Vivek: Toh yeh hedge sirf market crash ke scenario ke liye hota hai?

Shubham: Nahi. Hedge ka use kai scenarios mein hota hai — jaise geopolitical risk, event-based volatility, earnings season ya election year. Jab bhi uncertainty zyada ho, hedge karna ek smart move hota hai.

Vivek: Shubham, jab aap keh rahe ho ki put options ka use karke hum portfolio hedge kar sakte hain, toh kya yeh har tarah ke investors ke liye relevant hai — ya sirf un logon ke liye jo active traders hain?

Shubham: Yeh sabke liye relevant hai, Vivek. Chahe aap long-term investor ho ya short-term trader — hedge karna har kisi ke liye zaroori hai. Bas fark itna hota hai ki long-term investor zyada longer-dated options prefer karega, aur trader shayad near expiry options le.

Vivek: Toh investor aur trader ke hedge karne ka style alag hota hai?

Shubham: Exactly. Investor ko lagta hai ki market crash ek Black Swan event ho sakta hai — toh wo yearly hedge karega, ya quarterly. Lekin trader ke liye risk zyada tactical hota hai. Agar usse lagta hai ki iss mahine support level ke neeche jaane par market breakdown hoga, toh wo short-term hedge karega ussi support level ke around.

Vivek: Kya yeh knowledge common hai? Ya kuch log aaj bhi unaware hain?

Shubham: Honestly, yeh ek aisi secret strategy hai jo bahut kam log jaante hain. Kai seasoned traders aur experts bhi is concept ko use nahi karte, ya fir us tarike se nahi karte jo actually effective ho. Hedge ko log speculative samajhte hain, jabki yeh protective tool hai.

Vivek: Ab jab aapne bola ki hedging ka best tareeka long-dated options se hota hai — uska reason kya hai?

Shubham: Long-dated options mein time value zyada hoti hai. Isliye agar aap hedge kar rahe ho, toh aapko zyada samay milta hai us protection ka fayda lene ka. Short-dated options mein risk zyada hota hai — agar timing galat ho gaya toh pura paisa zero ho sakta hai. Isliye, protection ke liye long-dated options better hote hain.

Vivek: Shubham, options ke andar kai sare factors hote hain — jaise time decay, implied volatility, delta, etc. Jab hum hedge karte hain, toh inmein se sabse critical factor kya hota hai dhyan dene ke लिए?

Shubham: Bilkul sahi point hai, Vivek. Jab hum hedge kar rahe hote hain, toh sabse important hota hai "time decay" aur "volatility". Agar aap short-term option lete ho, toh time decay bahut jaldi impact karta hai. Lekin long-dated option mein aapko protection ka time zyada milta hai, aur volatility agar increase hoti hai, toh aapka hedge aur valuable ho jata hai.

Vivek: Aur agar market upar chala gaya, lekin hedge strategy se paisa nahi bana — toh?

Shubham: Toh definitely, yeh aapki strategy ki galti hai. Kyunki hedge ek insurance ki tarah hota hai. Agar market upar gaya aur aapka hedge kaam nahi aaya, toh aapko khushi honi chahiye ki market achha perform kar raha hai. Lekin agar market neeche gaya aur hedge fail hua — toh iska matlab strategy weak thi. Usse seekhna chahiye aur apne skill set ko improve karna chahiye.

Vivek: Toh hedge karne ka matlab yeh nahi ki aap profit kamaoge, balki yeh ek safety layer hai?

Shubham: Exactly. Hedge ka matlab profit nahi — safety. Yeh ek seatbelt ki tarah hai. Jab accident hota hai, tab uska kaam dikhayi deta hai. Same cheez hedge ke sath bhi hoti hai.

Vivek: Shubham, kya retail investors ke liye yeh possible hai ki woh khud se hedge karna seekh lein, ya phir unhe kisi expert ki madad leni chahiye?

Shubham: Bilkul seekh sakte hain, Vivek. Options ka basic logic samajhna zaroori hai — jaise ki call option kya hota hai, put option kya hota hai, aur unka payoff kaise kaam karta hai. Once yeh concepts clear ho jaate hain, toh hedge banana relatively simple ho jaata hai. Lekin haan, bina samjhe blindly trade karna risky ho sakta hai. Toh ya toh acche se samjho ya phir kisi advisor ki madad lo.

Vivek: Aajkal kai log YouTube ya social media se strategy pick kar lete hain bina samjhe. Kya yeh sahi hai?

Shubham: Yeh sabse badi galti hai. Strategy samajhna aur uski applicability samajhna equally important hai. Har strategy har situation mein kaam nahi karti. Market ka environment, volatility, aur aapka objective — sab match hona chahiye. Internet pe bohot kuch available hai, lekin har cheez blindly follow karna dangerous ho sakta hai.

Vivek: Ek aur sawal — kya kisi specific expiry ya duration ka hedge zyada effective hota hai?

Shubham: Haan. Hedge ideally long-dated hona chahiye. Kyunki short-term options mein time decay bohot zyada hota hai. Aapka hedge sirf ek hafta chale aur uske baad expire ho jaaye, toh protection khatam ho jaata hai. Isliye long-dated options mein hedge banana better hota hai. Aapko stability milti hai aur time milta hai adjust karne ka.

Vivek: Shubham, kai baar aisa hota hai ki market upar jata hai, lekin phir bhi strategy paisa nahi kama pati. Aise cases mein investor kya samjhe?

Shubham: Yeh ek common situation hai. Market upar gaya, lekin aapki strategy ne paisa nahi banaya — iska matlab yeh nahi ki market galat tha, balki strategy sahi nahi thi. Options mein multiple variables hote hain — volatility, time decay, Greeks — jo result ko impact karte hain. Toh agar profit nahi bana, toh woh galti aapki hai. Seekhne ka moka samjho, aur apni strategy ko optimize karo.

Vivek: Aapne pehle ek interesting point bola tha — ki traders ko har mahine support level hedge karna chahiye. Thoda aur detail mein explain karein?

Shubham: Zaroor. Har trader ke paas kuch na kuch idea hota hai ki market kis level tak gir sakta hai. Jaise maan lijiye, Nifty agar 20,000 ke niche gaya, toh aapko lagta hai breakdown ho sakta hai. Toh us level ke aas-paas ka protective put option le lo. Agar market waha tak nahi gaya, toh premium gaya, lekin agar gaya, toh aapka capital protected rahega. Yeh ek intelligent stop-loss ki tarah kaam karta hai.

Vivek: Kya yeh sirf large portfolios ke liye kaam karta hai ya small investors bhi try kar sakte hain?

Shubham: Sabke liye kaam karta hai. Even agar aapke paas ₹1 lakh ka portfolio hai, toh bhi aap ₹1-2k ke hedge bana sakte ho. Important baat yeh hai ki aap loss ko cap kar pa rahe ho. Aur wohi risk management ka basic principle hai.

Vivek: Aapne bola ki long-dated options mein hedging karni chahiye. Kyun short-term options nahi?

Shubham: Great question. Short-term options mein time decay bahut fast hota hai. Matlab agar market aapke favour mein bhi na jaye, toh bhi aapka option zero ho sakta hai sirf time ke kaaran. Lekin long-dated options — jaise 3 ya 6 mahine wale — zyada stable hote hain. Aapko time milta hai position ko develop hone ka. Aur agar correction aata hai, toh woh hedge actually kaam karta hai.

Vivek: Toh basically hedge karne ka idea yeh hai ki aap portfolio ke losses ko limited rakh sako?

Shubham: Exactly. Hedge ek tarah ka insurance hai. Jaise aap car insurance lete ho, waise hi portfolio insurance lena chahiye. Sab log apni car zaroor insure karte hain, lekin ₹10 lakh ka portfolio without hedge rakhte hain. Yeh irony hai.

Vivek: Bahut interesting analogy hai. Kya koi aisi mistake hai jo retail investors frequently karte hain jab woh hedge karne ki koshish karte hain?

Shubham: Haan, sabse badi mistake yeh hoti hai ki woh expiry ke aas-paas ka sasta option le lete hain hedge ke naam pe. Woh option sirf dikhta hai sasta, lekin kaam nahi karta. Dusra, woh hedge karte hain jab market already gir chuka hota hai. Hedging tab karni chahiye jab cheezein stable lag rahi ho, aur aapko lag raha ho ki downside aa sakti hai.

Vivek: Samajh gaya. Ab ek aur sawal — agar market continuously sideways ya slightly bullish bhi ho, toh hedge ka kya role rahega? Kya us case mein hedge waste ho jata hai?

Shubham: Nahi, hedge waste nahi hota. Yeh ek cost hoti hai — jaise insurance premium. Agar aapki car chori nahi hoti, toh aap yeh nahi kehte ki insurance waste ho gaya. Waise hi, agar market girta nahi, toh aap khush raho ki hedge ka use nahi hua. Lekin agar gira, toh aapke portfolio ne outperformance diya kyunki aapne loss control kiya.

Vivek: Kya aap kuch practical examples de sakte ho jahaan hedge ne portfolio ko bachaya?

Shubham: Bilkul. March 2020 ka time ya 2022 ke global correction ke phases mein jin investors ne long put options le rakhe the, unka downside kaafi limited raha. Unhone panic selling se bhi bachाव kiya aur jab market recover hua, toh unka base intact tha — toh unka recovery bhi jaldi hua.

Vivek: Excellent. Ek aur cheez — kya aise log jinke paas chhota capital hai, wo bhi hedge kar sakte hain?

Shubham: Haan, bilkul. Aaj ke time mein option buying affordable ho gayi hai. Agar aap ₹1 lakh invest kar rahe ho, toh ₹1-2k ka hedge lena koi badi baat nahi hai. Risk management ka scale chhote capital mein aur bhi important ho jaata hai.

Vivek: Great point. Ab agar koi investor hedge karne ka decision le bhi leta hai, toh sabse bada doubt hota hai ki kaunsa option lena chahiye — kaunsi expiry, kaunsa strike price?

Shubham: Yeh sahi question hai. Hedge karte waqt aapko long-dated options lena chahiye — jaise 3 ya 6 mahine wali expiry. Kyunki short-term options mein theta decay bahut fast hota hai. Aur strike price thoda sa out-of-the-money lena chahiye — jahan aapko lagta hai ki market agar crash kare toh yeh level touch ho sakta hai.

Vivek: Okay. Aur agar hedge le liya, toh uska monitoring kaise karein? Kya usko active manage karna padta hai?

Shubham: Nahi, hedge ek passive layer hona chahiye. Iska matlab yeh nahi ki aap roz usko track karo ya exit karo. Hedge tabhi activate hota hai jab market crash karta hai. Otherwise, usko ignore karo. Wo ek emergency airbag jaisa hai — use tabhi hota hai jab zarurat ho.

Vivek: Bahut hi clearly explain kiya aapne. Aakhri question yeh — aapke hisaab se retail investors ke liye options ka use sirf hedge ke liye hi hona chahiye ya kuch aur scope bhi hai?

Shubham: Main strongly believe karta hoon ki beginners ke liye sabse pehle hedge karna seekhna chahiye. Speculation baad mein aata hai. Pehle risk manage karna seekho, capital protect karo — uske baad agar aap confident ho, toh strategies jaisi spreads ya directional bets explore kar sakte ho. Lekin start safe se karo.

Vivek: Bilkul sahi kaha aapne, Shubham. Mujhe lagta hai ki ye ek mindset shift hai — log options ko sirf paisa banane ke tool ke रूप में dekhte hain, lekin uska asli power risk management mein hai.

Shubham: Exactly. Agar aap portfolio banate ho bina seatbelt ke, toh aap accident ke waqt pura capital lose kar sakte ho. Lekin agar aap hedge karke chal rahe ho, toh chahe market kitna bhi gire, aapka base secure rehta hai. Isiliye hedge karna discipline ka part hona chahiye — ek baar karne se nahi hoga, consistently karna padta hai.

Vivek: Bahut badiya. Mujhe lagta hai ki hamare jo listeners hain, unko is conversation se ek naya perspective mila hoga options ke use ko lekar. Thank you so much, Shubham, for sharing such valuable and actionable insights.

Shubham: Thank you, Vivek. Bahut maza aaya. Aur mujhe khushi hai ki aap log is topic ko explore kar rahe ho — jahan education aur safety dono par equal focus ho.

Vivek: To doston, yeh tha hamara aaj ka episode — jahan humne samjha ki options sirf speculation ka tool nahi, balki ek powerful safety net bhi hai. Agar aapko yeh episode pasand aaya ho, toh m.Stock ke channel ko subscribe karna na bhoolein. Podcast ko apne doston ke saath zaroor share karein, aur humein apna feedback bhejein.

Milte hain agle episode mein — naye insights ke saath, naye experts ke saath. Tab tak ke liye, take care, stay informed, and happy investing.