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How does an offsetting trade work?

How does an offsetting trade work?

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Answer #1

Offsetting Trade is the trade which will completely eliminate the change(risk & reward) of an ongoing trade, WITHOUT CLOSING OR EXITING THE ONGOING TRADE.

Example:

Shares of a company are held. Due to any reason, it is not possible to sell the shares, but trader wants to sell the shares. In such case, he can simply buy the At the money Put Option. In this way, Profit/Loss on these two positions will offset each other.

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