Questions about hedging a portfolio with options
How many Nifty lots does a portfolio hedge need?
The portfolio value times its beta to Nifty, divided by the value of one Nifty lot. The hedge calculator does the arithmetic; the hedge covers the market part of the risk, not stock specific risk.
Futures or options: which hedge does what?
A short futures hedge offsets both gains and losses and needs margin; a long put keeps the upside and covers the downside for a premium. Module 13.7 and the question page compare both.
What is basis risk in a hedge?
The chance that the hedge and the holding do not move together. In India it comes from the Nifty future trading away from the index before expiry and from a portfolio that does not follow Nifty one for one.
Is a collar a free hedge?
No. A collar pays for the put by writing a call above the market, so the net premium is lower, but the gain above the call strike is given up. The lower cost always comes from something surrendered.