A holder of Rs 50 lakh of large cap stocks looks at Nifty on Wednesday 10 Jun 2026 and asks a plain question: how many lots would cover this? The portfolio moves with a beta of 0.95 against Nifty, so it carries Rs 47.5 lakh of Nifty exposure. One June lot of 65 units was worth Rs 15.11 lakh at the future of 23,240.10. That is 3.14 lots, so the answer is 3. This lesson answers three questions people ask about Nifty hedges: how many lots, futures or puts, and whether a put every month is worth it. The numbers are dated NSE figures and an assumed portfolio. It is a way to read a hedge, not a hedge for any real holding.
3By the end you can
- Size a Nifty hedge for a portfolio from its value, beta and the value of one lot.
- Compare sold futures with bought puts in a calm month and in a fall, on dated NSE figures.
- Say what rounding, a wrong beta and a yearly premium bill do to a hedge.
The idea, plainly
How many lots: the arithmetic
A hedge only makes sense on something already owned. The sizing has three steps. Multiply the portfolio value by its beta to get the exposure to Nifty. Divide by the value of one lot, the future times the lot size. Round to whole lots. Beta is the slope of the portfolio's returns on Nifty's, an estimate from past data, and the portfolio's own stock specific moves are not in it.
Value times beta, divided by one lot, gives the lots
Read one more paragraph, 52 words
Rounding matters at this size. Three lots cover Rs 45.32 lakh, so Rs 2.18 lakh of exposure stays open. A portfolio under about half a lot of exposure, near Rs 7.6 lakh, cannot be hedged with Nifty contracts at all: the smallest hedge would be larger than the thing hedged.
Two ways to hedge
Sell Nifty futures. There is no premium. A fall in the portfolio is offset by a gain on the future, and a rise is offset by a loss, so the line goes flat. Futures settle in cash every day, so the account needs cash for a rising market, and margin is blocked while the position is open (see margins without jargon). A sold future also earns the basis, because it trades above the index and converges to it by expiry.
Sold futures cancel most of the movement, and the gains go too
A put sets a floor under the portfolio and keeps the gains less the premium
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Buy Nifty puts. A premium is paid upfront. Below the strike the put pays, so the loss stops near the strike, and above it the portfolio keeps its gains less the premium. Take the 22,100 put, 4.9% below the future: it cost 47.05 a unit on 10 Jun 2026, so Rs 9,175 for 3 lots, which is 0.18% of the portfolio for 20 days. The part of a fall between the future and the strike stays with the holder, as the deductible in an insurance policy does.
This is also what beta hedging means: size by beta, then pick the instrument. The sizing for puts is the same as for futures. Either hedge expires. The monthly contract ends on the last Tuesday of the month, so a hedge held for longer needs a new contract each time, at that day's price, and a sold future also has to be rolled: see rollover and, for the futures side in depth, hedging with futures. A weekly put costs less per contract and has to be bought more often.
What each one did in two months
Take the same assumed portfolio through two dated windows. In the calm one, Nifty rose 2.8% from 10 Jun to the 30 Jun expiry. In the fall, Nifty went from 25,088.40 on 2 Feb to 22,331.40 on 30 Mar, down 11.0%. The portfolio is assumed to move with its beta times the index return, and both hedges are held to expiry.
The February fall went through the put's strike
| Assumed portfolio | 10 to 30 Jun 2026 | 2 Feb to 30 Mar 2026 |
|---|---|---|
| Nifty move | 2.8% | −11.0% |
| No hedge | Rs 1,33,160 | −Rs 5,21,984 |
| Sold futures, net | Rs 11,158 | Rs 56,386 |
| Puts, net of premium | Rs 1,23,985 | −Rs 2,12,792 |
| Put premium paid | Rs 9,175 | Rs 25,935 |
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In June the futures hedge gave back nearly all of the rise, and the puts gave back only the premium. In the fall the portfolio lost Rs 5,21,984 unhedged. The futures hedge ended Rs 56,386 ahead, partly because three lots slightly over cover 2.89 lots of exposure and partly because the sold future earned Rs 40,755 of basis. The puts cut the loss to Rs 2,12,792 and kept the upside. Two windows show the shape, not how often it happens.
When beta is wrong
A hedge sized on a beta of 0.95 protects a portfolio whose true beta is another number only in part. Take a 5% fall in Nifty from the 10 Jun close and the three sold futures, which gain Rs 2,31,250 in that fall.
| True beta | Portfolio loss | Net with futures |
|---|---|---|
| 0.75 | Rs 1,87,500 | Rs 43,750 |
| 0.95 | Rs 2,37,500 | −Rs 6,250 |
| 1.15 | Rs 2,87,500 | −Rs 56,250 |
A beta of 1.15 against an assumed 0.95 leaves Rs 56,250 uncovered in a 5% fall. The hedge works through the number it was given, so a wrong beta carries into the result.
Is a put every month worth it for a long term holder?
It is a standing bill. The 22,100 put cost 0.18% of the portfolio for 20 days on 10 Jun 2026. Repeated through a year at that price the bill comes to 3.3%. The 24,050 put bought on 2 Feb 2026, for 56 days, cost 0.52% and comes to 3.4% a year. Cover is dearer after a fall, when India VIX is high. India VIX closed at 15.63 on 10 Jun and 13.87 on 2 Feb 2026, against 27.89 on 30 Mar after the fall, so these two calmer prices understate what a bad month costs: see why and when to hedge. Against that bill stands a fall like the 11.0% one above. Whether the bill is worth it depends on how large a loss the holder can carry, how long the holder can wait and what cover costs on the day. Holding fewer stocks or more cash also limits a loss with no premium to pay, and gives up the gains too.
The nearer the strike, the dearer the cover for the same lots
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Strike choice moves the bill. Three lots of the 22,800 put, 1.9% below the future, cost 0.62% of the portfolio on 10 Jun 2026. The 22,500 put, 3.2% below, cost 0.37%. A nearer strike buys more cover and leaves a smaller deductible.
Hedging here means insurance on what is held. Selling options to pay for the cover, or selling an option with nothing underneath it, is a different position, and this lesson does not cover it. RupeeCase's own hedging page describes F&O used only to protect a portfolio. For a put paid for by selling a call, see collars and put spreads, and for a mutual fund portfolio hedging mutual fund portfolios.
Worked example: three lots, both months
The assumed portfolio is worth Rs 50 lakh with a beta of 0.95. Both hedges use 3 lots of 65 units and are held to expiry, which settled on the index close.
| Step | 10 to 30 Jun 2026 | 2 Feb to 30 Mar 2026 |
|---|---|---|
| Future at the start | 23,240.10 | 25,297.40 |
| Exact lots by beta | 3.14 | 2.89 |
| Put strike and premium | 22,100 at 47.05 | 24,050 at 133.00 |
| Nifty close at expiry | 23,865.75 | 22,331.40 |
| Put value at expiry, 3 lots | Expired worthless | Rs 3,35,127 |
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The February put finished in the money, so it also carries STT on its intrinsic value: 0.125% for the 30 Mar 2026 expiry, which is Rs 419 here, and 0.15% from 1 Apr 2026. Brokerage and the other charges come on top, see the cost of an F&O trade. The hedge calculator below opens on the 10 Jun example with the same Rs 50 lakh and beta, so you can change the value, the beta and the strike and watch the lots and the costs move.
The common mistake
The belief: If I hedge with Nifty, I am fully protected.
Test it on the tables. The three lots left Rs 2.18 lakh of exposure open. A wrong beta of 1.15 left Rs 56,250 uncovered in a 5% fall. The put paid only below its strike and cost Rs 25,935 for the fall window. Nifty derivatives hedge the index part of the risk, and the stock specific part stays, along with the rounding, the basis and the premium. A hedge cuts only the risk it was sized for. It does not remove loss.
2 terms this section turns on
Key takeaways
- Lots equal beta times value, divided by the future times the lot size.
- Whole lots leave part of the exposure open, and small portfolios cannot be hedged.
- Sold futures flatten the line; puts keep the gains for a premium.
- A wrong beta of 1.15 left Rs 56,250 uncovered in a 5% fall.
- A put every month adds up to about 3.3% a year at calm prices.
- A Nifty hedge cuts index risk only; stock specific risk stays.
Before you trade. Derivatives trading carries a high risk of loss. SEBI's study "Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26)" (August 2026) found that 87.7% of individual traders in equity F&O made net losses in FY26, with aggregate net losses of Rs 91,685 crore. Read the SEBI study