What, if, we are both, long and short on Futures and exit the loss one and invest 4times on the profit side?

          A strategy involving both long and short futures positions, where the losing position is exited and the winning position is amplified, is a common trading approach. Let's say you're long (buy) and short (sell) futures, and the short position incurs a loss. You would then exit the losing short position and increase your long position by four times the original size.

Example:

1. Initial Positions:

You take a long position of 1 futures contract and a short position of 1 futures contract on the same underlying asset.

2. Market Movement:

The price of the underlying asset goes up, causing your long position to profit and your short position to lose.

3. Loss Position Exit:

You close your short position, incurring a loss, and free up capital.

4. Profit Position Amplification:

You then take on 4 times the original long position (4 futures contracts) on the same underlying asset.

Example Calculation:

Initial Investment:

You invest Rs. 1,00,000 to take both long and short positions (Rs. 50,000 on each).

Long Position Profit:

The underlying asset price goes up by 5 points. Your long position gains Rs. 15,000 (5 points * Rs. 3,000 per point).

Short Position Loss:

The underlying asset price goes up by 5 points. Your short position loses Rs. 15,000 (5 points * Rs. 3,000 per point).

Net Profit/Loss:

Your initial investment of Rs. 1,00,000 is offset by your long position gains and short position losses, resulting in a net profit/loss of Rs. 0.

Amplification:

You exit the short position and now invest Rs. 50,000 * 4 = Rs. 2,00,000 in the long position.

Market Movement:

The price continues to rise.

Profit:

Your amplified long position now generates a significant profit. For example, if the price goes up by another 5 points, your long position gains Rs. 60,000 (5 points * Rs. 12,000 per point).

Explanation:

This strategy aims to capitalize on a price trend by:

Neutralizing Initial Risk:

The initial long and short positions are designed to protect against price volatility in either direction, at least until the loss position is closed and the winning position is amplified.

Amplifying Profits:

By closing the losing position and investing four times the original amount in the winning position, the trader seeks to increase their potential returns on a trend continuation.

Important Considerations:

Risk Management:

This strategy can be risky, as it concentrates investment on one side of the market. A sudden reversal in price could lead to substantial losses.

Margin Requirements:

Futures trading involves margin requirements, and a large position can require a significant amount of capital.

Expertise:

This strategy requires a good understanding of futures trading, risk management, and technical analysis.

Market Conditions:

The success of this strategy depends on the market's ability to continue trending in the anticipated direction.