FIIs DIIs
If I am an FII,
I have lots of cash holding of stocks...
Now I can do multiple things with it,
In a bullish market-
1)Keep holding it and hedge them with Index put options...
2) Sell out of the money call options and if it goes in risk, exit the holding and pay MTM off...
In bearish Market-
1) Keep selling in futures, so that the value decline in cash holdings is offset...
2) sell in futures and dump the stocks even more and square off at even a lower level, and then again buy stocks...
In a sideways market-
1) buy puts, to protect downside...
2) sell futures offset with cash holdings
3) buy call options to earn any upside...
Current scenario is of sideways market... And the data sheet data gets circulated regarding pro fii dii positions, doesnt include their holdings in cash, that's why most of the reading of people is not correct...
Hope now you will be able to understand that data better...
FIIs are hedged on 2 legs and take profit on only one leg
If I am a DII-
Whether I am mutual fund, lic, bank, nbfc, pension fund,
I am not allowed to take any naked position in derivatives...
And cash buying and selling will only depend on my investment policy and money inflow or outflow from public on a given day...
If I am a Pro-
I am liquidity provider of the system and I have my Algo and HFT(High frequency trading) systems in place, most of the orders in the system is because of me but not all trades belong to me...
And I dont create wall like FIIs or DIIs,
I play the frequency and momentum through my algo systems
If I am client-
If I am an HNI, I play futures and hedge it with options and use my holdings as margin to the broker...
My cash is parked in debt funds or FDs, at times my FDs are also given to broker as margin...
If I am retail client-
I want to become rich as soon as possible, realising that stock market is solution of every problem... But then I am introduced to tipsters and people selling Holy Grail...
And then I either loose some money or earn some money... But what makes me different from all the other players is, I have a burden of emotion, which is my biggest enemy...
And whether I am a Investor or trader, I always forget logical thinking and rely on emotions...
Thats why I sell stock when it is going up and I buy them when they have already formed top...
In trading I take a position and then think whether its right or wrong...
Not realising that stoploss is not there and I loose money for my next 4 trades by not putting stoplosses.
ISSUED IN PUBLIC INTEREST...
By: via @AlliesFin Serve Stock Market
